Annual Report 2023 Contents 04 Corporate directory 70 Consolidated statement of changes in equity 06 Letter from the Managing Director 71 Consolidated statement of cash flows 08 Letter from the Chair 72 Notes to the consolidated financial statements 10 Directors’ report 110 Directors’ declaration 52 Auditor’s independence declaration 111 Independent Auditor’s report 54 Sustainability and people 116 Additional shareholder information 68 Consolidated statement of profit or loss and other comprehensive income 119 Corporate governance statement 69 Consolidated statement of financial position 129 Schedule of mineral tenements Talga Group Ltd and controlled entities ABN 32 138 405 419 4 5 Corporate directory Directors ABN Terry Stinson (Non-Executive Chair) 32 138 405 419 Mark Thompson (Managing Director) Grant Mooney (Non-Executive Director) Securities exchange listing Stephen Lowe (Non-Executive Director) Talga Group Ltd is listed on the ASX Ola Rinnan (Non-Executive Director) Home Exchange: Perth Company Secretary Dean Scarparolo Registered office and principal place of business Suite 3.03, Level 3 46 Colin Street West Perth WA 6005 Phone: 08 9481 6667 Email and website Email: info@talgagroup.com Website: www.talgagroup.com ASX Code: TLG (Shares) Share registry Automic Registry Services GPO Box 5193 Sydney NSW 2001 Phone: 1300 288 664 Auditors Ernst & Young 11 Mounts Bay Rd, Perth WA Annual Report 2023Talga Group 6 7 Letter from the Managing Director Dear Shareholders, This year as I ‘turned the sod’ at our commercial anode These are significant, but they are built on many years of memorable achievements and personal milestones. refinery site in Sweden, I reflected on how far Talga has From acquiring the Vittangi Project and watching the come as not only a company, but as a purpose. graphite ore emerge from our trial mines, to receiving the Over a decade ago, I had a vision that graphite and graphene would play a vital role in the transition to a clean energy economy. I thought “there must be an alternative to the dirty old supply chains of our time!”. I also believed that innovation and sustainability were essential to Talga’s long-term success. Since acquiring our first Swedish assets in 2011, we have first test results of Talnode®-C and Talnode®-Si, proving our innovations and capabilities in anode making, our success today is born from the smaller steps along our journey. Thus we have together seen our natural graphite resource go from rocks in the ground to an advanced battery material which can significantly reduce carbon emissions in the lithium-ion battery industry. To say it has been a rollercoaster stayed true to that vision. We have discovered and developed of a journey would be an understatement. new natural graphite resources and an array of advanced materials made with our own processing technology. We have invested successfully in research and development, and we have partnered with leading automotive and battery companies to bring new products to market. I am proud to say that our hard work has paid off. Today, Talga is a significant emerging supplier of battery materials, with demonstrated potential to be one of the largest in the world outside Asia. Our dedication to sustainability has reduced the environmental impact of our customers’ It’s not easy to create something like Talga. However, I am confident that we will continue to grow and succeed. We have a strong, passionate team; world-leading mineral and technology assets; and the capability to make a difference. That’s the idea that has stayed with me from day one until this year, when I dug the shovel into the ground at our Refinery site. The demand for our materials is expected to grow rapidly in the coming years, and we are perfectly positioned to meet this opportunity. products, from paint coatings to electric vehicles. Thank you for your support. I am personally grateful to our talented staff who share my philosophy of sustainability and innovation, and whose hard work makes it all possible. I am also grateful for the ongoing support of our shareholders, whose investment in our growing business has been vital to making our vision a reality. The past year has seen key operational milestones in Mark Thompson permitting, product commercialisation and finance. Managing Director Talga GroupAnnual Report 2023 8 9 Letter from the Chair Dear fellow Talga shareholders, begin construction at the appropriate time and deliver the The past twelve months have seen Talga solidify its unique position as a sustainable natural graphite anode next steps on our vision of becoming a leading supplier of sustainable and European-origin battery materials. producer for the booming European and global lithium-ion These permitting milestones were bolstered by support battery markets. We have seen substantial milestone from the European Investment Bank, which approved €150 achievements across our entire mine-to-anode project, million senior debt to support the Vittangi Anode Project. including in permitting, financing, and products. These This is a significant achievement demonstrating institutional accomplishments are foundational for Talga as we move confidence in the commercial feasibility of our projects. toward commercial operations. The EIB has a strong ESG focus and approval also reflects The past year’s achievements were made possible by our outstanding team of Talga employees, now 61 people across four countries and continuing to grow. We continued to enhance our skill base with key capabilities and experience, particularly in the areas of exploration and mining, material science, battery science, quality assurance, Talga’s focus on some of the world’s most stringent social and environmental due diligence standards. This commitment from the EIB will be complemented by a consortium of government-owned credit agencies and European commercial banks selected by Talga for their strong credentials in the energy transition and mining sectors. project management, manufacturing and operations, Interest in Talga’s products from the battery materials and environmental sciences. The team has exceptional market has grown over the year. Customer relationships ability, and it’s their efforts which have underpinned have continued to progress through negotiations and Talga’s progress over the past year. The extensive range the development of agreements, including non-binding of knowledge and expertise possessed by both new and offtake term sheets for production scale supply secured experienced team members ensures that Talga is ready with European battery makers ACC and Verkor. These to implement its strategy for commercial production and commercial negotiations are built on customer confidence in future expansion. My fellow Directors and I recognise the performance characteristics of Talga’s anode products. Talga management and the whole team’s efforts and Testing will continue with existing and new customers to be achievements over the past year. acquired over the coming year. Most significant of the past year’s accomplishments, We continue to diversify our product range and have Talga received environmental permit approval from the commissioned an expanded Talnode®-Si pilot production line Swedish Land and Environment Court for its Nunasvaara within our facilities in Germany. Before this commissioning, South mining operation. This is the culmination of years of research samples were developed and produced at our environmental, technical and community efforts across the Cambridge UK R&D facility. The Rudolstadt pilot production organisation. The remaining steps in the approval include line will leverage existing infrastructure and processes to final resolutions of an appeals process, which is currently produce larger samples of the silicon anode additive material progressing with the relevant Swedish authorities. for various battery customer qualification programs. Talga is Our downstream Luleå anode refinery was granted environmental and building permits, which are now in legal force. We also acquired the refinery land, allowing us to also working with customers to align potential commercial Talnode®-Si production plans to support continuing negotiations and build commercial confidence. Talga’s EU mine-to-anode project has an outstanding opportunity to feed directly into the looming deficit of battery materials More broadly across the business, in the UK we opened our Talga’s achievements over the past year have been new Cambridge Battery Centre of Excellence to continue significant and there is no doubt that even more is to be innovation into the next generation of battery technology. achieved on the near-term horizon. Talga’s EU mine-to-anode In Sweden, through continued investment in our Electric project has an outstanding opportunity to feed directly Vehicle Anode Plant in Luleå, we attained ISO 14001 into the looming deficit of battery materials and make a Environmental Accreditation, with further work progressing substantial contribution to both the European and global in this area. And in Australia, this year and for the first time, green transition. Talga was included in the S&P/ASX 300 index, reflecting our strong share market position. My fellow Directors and I once again thank our fellow shareholders and the Talga team for all support and Looking to the future, Talga has boosted the Vittangi achievements over the past year. Terry Stinson Non-Executive Chair Graphite Mineral Resource. The growth of these resources, which are already the largest in Europe, will underpin potential expansion pathways to anode production beyond the 100,000 tonnes per annum outlined under the Vittangi Anode Project and Niska expansion. This is an exciting time for the lithium-ion battery and graphite anode industries and significant growth is expected over the coming years across all markets. To support localisation and to Talga’s benefit, the European Union has advanced ambitious legislation which supports all parts of the battery supply chain, from extraction of raw materials to battery manufacturing. The market for electric vehicles continues to grow, with the International Energy Agency forecasting 3.4 million units sold in Europe in 2023, an increase of 26% increase on 20221. This is incredible growth from only a few years ago, especially considering the pressures of a recessionary environment. 1 www.iea.org/energy-system/transport/electric-vehicles Talga GroupAnnual Report 2023 10 11 Directors’ report Talga GroupAnnual Report 2023 12 13 The Directors present their report, together with the financial statements of Talga Group Ltd (“Talga” or “the Company”) and its controlled entities (“the Group”), for the financial year ended 30 June 2023. 1. Review of operations The following persons were Directors of Talga Group Ltd during the financial year and up to the date of this report: Directors Position Terry Stinson Non-Executive Chair Mark Thompson Managing Director Date of appointment 8 February 2017 21 July 2009 Grant Mooney Non-Executive Director 20 February 2014 Stephen Lowe Non-Executive Director 17 December 2015 Ola Rinnan Non-Executive Director 7 August 2017 Annual Report 2023Talga Group 14 15 2. Information on Directors The names and details of Directors in office during the financial year and up to the date of this report are as follows: Terry Stinson Mark Thompson Grant Mooney Stephen Lowe Ola Rinnan Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Date of appointment 8 February 2017 21 July 2009 20 February 2014 17 December 2015 7 August 2017 Mr Stinson has over 35 years’ Mr Thompson has over 30 years’ Mr Mooney has a background in Mr Lowe has a background in business Mr Rinnan has extensive Executive and Non-Executive global experience in the geoscience, corporate advisory with extensive management with over 20 years’ commercialisation and leadership Director experience, working for technology and mineral industries and experience in equity capital markets, experience consulting to a range of experience across the energy, global innovation companies across 20 years in public company leadership corporate governance, and M&A corporate and high wealth clients. banking and finance sectors and a range of industry segments, along and capital markets. Mr Thompson transactions along with a wealth Mr Lowe was the Group Manager for has held numerous board positions with a proven track record of forming founded Talga and previously founded of experience in resources and the Creasy Group for 12 years before for European listed companies and and leading international business and served on the Board of ASX-listed technology markets. He is a member retiring in August 2019. collaborations and joint ventures. Catalyst Metals Limited. Formerly the CEO (12 April 2017 to He is a member of the Australian of the Institute of Chartered Accountants in Australia. Mr Lowe is also an experienced public company Director, being the 18 November 2019) and Managing Institute of Geoscientists, the Society Mr Mooney is a Non-Executive Director former Chair of Sirius Resources NL Director (20 May 2008 to 12 April 2017) of Economic Geologists, and the of several ASX-listed companies and former Non-Executive Director financial institutions including Non-Executive Directorships in Smedvig group, companies and DFCU Bank (representing the largest shareholder Norfund). of Orbital Corporation, VP for Global Society of Vertebrate Paleontology. including wave energy technology of Coziron Resources Ltd, Belararox Formerly the Chairman of Avinor AS, Fuel Systems at Siemens AG, CEO and Managing Director of Synerject and VP of Manufacturing Outboard Marine Corporation, Mr Stinson is currently the Non-Executive Chair of wave energy technology developer Carnegie Clean Energy Limited (appointed 19 October 2018), Non-Executive Chair of Engentus Pty Ltd (appointed May 2021), and Non-Executive Director of Aurora Labs Limited (appointed 27 February 2020). developer Carnegie Clean Energy Ltd and Windward Resources Ltd. Mr CEO at Eidsiva Energi AS, CEO at Limited (appointed 19 February 2008), Lowe holds a Bachelor of Business Norgeskreditt AS and CFO for Moelven 3D metal printing technology company (Accounting) and a Masters of Industrier AS, Mr Rinnan is currently Aurora Labs Limited (appointed 25 Taxation from the UNSW. the Chairman of Nordavind DC Sites March 2020), and mineral resources companies Riedel Resources Ltd (appointed 31 October 2018), Accelerate Resources Limited (appointed 1 July 2017), and Gibb River Diamonds Limited (appointed 14 October 2008). He is a former Non-Executive Director of Greenstone Resources Limited (29 November 2002 to 19 August 2022) and SRJ Technologies Limited (2 June 2020 to 17 January 2023). AS, Kilde AS, Espern Eiendom AS, B1 Holding AS, and Gravdahl AS. Mr Rinnan holds a Bachelor in Economics and a Masters in Construction and Materials Technology. Interests in shares 177,372 Interests in performance rights 600,000 14,382,174 4,000,000 Nil 500,000 2,077,273 500,000 Nil 500,000 Talga GroupAnnual Report 2023 16 17 3. Information on company secretary 5. Principal activities and significant changes in state of affairs Dean Scarparolo Appointed 5th February 2015 Mr Scarparolo is a member of CPA Australia and has a wealth of experience developing and managing the finance departments of ASX-listed companies within the resources sector. Mr Scarparolo is also the Financial Controller for the Group. 4. Corporate structure Talga Group Ltd is a company limited by shares incorporated and domiciled in Australia. Talga Group Ltd has a 100% interest in Talga Mining Pty Ltd, Talga Anode UK Limited and Talga Technologies Limited (both UK companies), and Talga Advanced Materials GmbH (a German company). Talga Mining Pty Ltd has a 100% interest in Talga AB, Talga Battery Metals AB, Talga Tech AB, Raita Graphite AB, and Jalk Graphite AB (all Swedish companies). Talga is building a European battery materials supply chain During the year, significant changes in the state of affairs to offer products critical to the green transition. The principal of the Group were as follows: activities of the Group during the financial year comprised: — Vittangi Anode Project environmental permits — Execution of Vittangi Anode Project development approved for both the Nunasvaara South mining including advancing offtake negotiations to allocate operation and the Luleå anode production, with the Talnode®-C production, progressing debt funding former progressing through the statutory appeals approval as part of securing Project financing and process and the latter having entered into force. obtaining key permit approvals; — Advancements in securing Vittangi Anode Project — Operation of the Electric Vehicle Anode (EVA) plant in financing in line with the targeted project debt gearing Luleå, Sweden, to supply battery anode qualification of 60%. samples for customers and ramp up of processing capability in preparation of commercial Talnode®-C production; — Commercial negotiations progressed to secure binding offtakes for Talnode®-C production, including under non-binding agreements with battery makers — Development and commercialisation of next generation Automotive Cells Company SE and Verkor SA. battery anode products, conductive additives and advanced graphitic materials; and — Completion of trial mining at the Niska South deposit with total extraction of 25,000 tonnes graphite ore for — Graphite mineral resource growth and exploration processing into Talnode® battery products. drilling, underpinning future expansions. — Vittangi Mineral Resource increased to 36.9 million tonnes at 23.1% graphite. Talga GroupAnnual Report 2023 18 19 6. Review of operations Commercial and project development — A non-binding Memorandum of Understanding with Mitsui & Co. Europe Plc lapsed in March 2023. Corporate — European battery maker Automotive Cells Company Discussions related to commercial collaborations in — Successfully raised A$72M across institutional SE (ACC), co-owned by Mercedes-Benz, Stellantis and marketing and trading opportunities across global placements and an oversubscribed Share Purchase Saft entered a non-binding Offtake Term Sheet for battery materials markets continued. supply of Talnode®-C, from the Vittangi Anode Project in Sweden. — French EV battery manufacturer Verkor SA signed a non-binding Letter of Intent to secure long-term Talnode®-C supply for its electric vehicle applications. — Talnode®-C commercial discussions, underpinned by qualification of large-scale samples provided from the Company’s operating Electric Vehicle Anode (EVA) qualification plant, progressed with additional customers under NDA as Talga allocates its planned graphite anode production across offtake supply agreements. — Advancements in commercialisation of Talga’s silicon anode, Talnode®-Si, with successful customer test work conducted and expanded pilot line commissioned in the Company’s processing facilities in Rudolstadt, Germany. — Talga’s commercial battery anode production plant (Refinery) in Luleå, Sweden, granted environmental permit and building permits. — Environmental and Natura 2000 permit for Talga’s Nunasvaara South mining operation approved by the Swedish Land and Environment Court and progressing through the statutory appeals process. — European Investment Bank (EIB), one of the world’s largest providers of climate finance, approved €150 million senior debt funding to underpin Vittangi Anode Project with loan documentation advancing, including customary terms and conditions for a financing facility of this type, subject to final negotiations and fulfilment of EIB conditions. — Broader debt financing package progressed with multiple leading export credit agencies, commercial banks and international financial institutions to a targeted Project debt gearing of up to 60%. Plan to support advancement of Vittangi Anode Project development, scaled up EVA plant production, next generation anode development (including Talnode®-Si commercialisation), and Niska expansion workstreams Mineral development and exploration — Outstanding results from 2022 graphite drilling and resource drilling. program of 1km long “Niska Link” target and extensions supported subsequent Vittangi Graphite Project Mineral Resource upgrade. — Total Vittangi Graphite Project Mineral Resource boosted by 23% to 36.9 million tonnes at 23.1% graphite, applying a higher cut-off grade of 11% graphite, including 71% boost to total Niska graphite Mineral Resource. — 25,000 tonnes of graphite ore extracted during successful Niska South trial mine campaign followed by backfilling of the mine and rehabilitation completed in line with the Company’s permit obligations. — Awarded ISO 14001 certification for the EVA plant environmental management systems, including onsite battery laboratories, and office in Luleå. — Opened new Battery Centre of Excellence in Cambridge, UK, in a significant expansion of Talga’s R&D facilities. — Swedish operations team bolstered and key management systems implemented as part of ongoing operational readiness programs to support Vittangi Anode Project execution phase and future expansions. — Talga Group Ltd (ASX:TLG) included in the S&P/ASX 300 Index. Future outlook and strategy Over the coming financial year, the Group aims to continue delivery of key milestones in the Vittangi Anode Project, including commencement of Luleå anode refinery construction and other corporate activities required for project execution. Furthermore, the Company will progress work and studies towards Vittangi Anode Project expansion options, as well as the potential of other battery mineral projects. The Company will proceed with ongoing implementation of the Talnode®-Si commercialisation strategy and further development of other potential battery material products through its R&D division. Talga Group included in S&P/ ASX 300 Index for the first time Talga GroupAnnual Report 2023 20 21 7. Mineral resources and ore reserve statement This statement represents the Mineral Resources and Ore Reserves (“MROR”) for Talga Group Ltd as at 30 June 2023. Mineral resources This MROR statement has been compiled and reported in accordance with the guidelines of the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (JORC Code). Talga owns 100% of multiple mineral assets of graphite (“Cg”), copper (“Cu”), cobalt (“Co”) and iron (“Fe”) in northern Sweden. An overview of each of the assets in the Group’s portfolio at 30 June 2023 is below in Table 1 and details of each project’s Mineral Resource categories are set out in This statement is to be reviewed and updated annually in Tables 2 to 7. accordance with Section 15 of the JORC Code 2012. The nominated annual review date for this MROR statement is 30 June. As at the Annual Review date of 30 June 2023, this MROR Statement has been approved by the named Competent Persons (see the Competent Persons Statement on page 27). Table 1 Talga 30 June 2023 Total Mineral Resources Project Tonnes Ore (Mt) Cg (%) Fe (%) Cu (%) Vittangi Graphite 36.9 23.1 Jalkunen Graphite 31.5 14.9 Raitajärvi Graphite 4.3 7.1 Total Graphite 72.7 18.6 Kiskama Copper-Cobalt Total Copper-Cobalt Vittangi Iron Masugnsbyn Iron Total Iron Notes: 7.7 7.7 123.6 87.0 210.6 - - - - - - - - - - - 0.25 0.04 0.25 0.04 32.6 28.3 30.8 - - - - - - Grade Co (%) - - - - - - - - Contained Mineral Fe (Mt) Cu (t) Co (t) - - - - - - - - - - - - - - 17000 1800 17000 1800 40.3 24.6 64.9 - - - - - - Cg (Mt) 8.5 4.7 0.3 13.5 - - - - - 1. Details of each of the Indicated and Inferred Mineral Resource 4. The graphite and iron resources are separate deposits but categories are set out in tables 2 to 7. sometimes occur within the same project area. The Kiskama 2. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding. 3. All projects are 100% Talga owned. Copper-Cobalt Project is a separate deposit and project from the graphite and iron projects. 5. Mineral quantities are contained mineral. 6. Mineral Resources are inclusive of Indicated and Inferred Mineral Resource categories. Vittangi Graphite Project, northern Sweden (Talga owns 100%) Table 2 Vittangi Graphite Project – JORC (2012) Resources at 11% Cg cut-off Deposit JORC Resource Category Tonnes Grade Cg (%) Nunasvaara South Nunasvaara North Nunasvaara East Niska North Niska Link Niska South Total Total Indicated Inferred Indicated Inferred Indicated Inferred Indicated Inferred Indicated Inferred Indicated Inferred Indicated Inferred 8,528,000 2,738,000 4,231,000 1,952,000 3,029,000 1,449,000 7,906,000 1,710,000 1,156,000 944,000 2,964,000 246,000 27,814,000 9,039,000 36,853,000 24.8 24.3 27.2 15.8 23.2 22.9 22.7 22.3 16.6 19.1 22.2 18.9 23.8 21.2 23.1 Note: Tonnes rounded to nearest thousand tonnes. The Nunasvaara graphite Mineral Resource estimate was The total for the Vittangi Graphite Project has increased first disclosed on 28 February 2012 (ASX:TLG 28 February from the previous Reporting Period due to a Mineral 2012), and last disclosed on 3 April 2023 in accordance with Resource update disclosed in April 2023 (ASX:TLG the JORC Code 2012 (ASX:TLG 3 April 2023). 3 April 2023). The Niska graphite Mineral Resource estimate was first disclosed on 15 October 2019, and last disclosed on 3 April 2023 in accordance with the JORC Code 2012 (ASX:TLG 3 April 2023). Talga GroupAnnual Report 2023 22 23 Jalkunen Graphite Project, northern Sweden (Talga owns 100%) Kiskama Copper-Cobalt Project, northern Sweden (Talga owns 100%) Table 3 Table 5 Jalkunen Graphite Project – JORC (2012) Resource at 10% Cg cut-off Kiskama Copper-Cobalt Project – JORC (2012) Resource at 0.1% CuEq cut-off Deposit Jalkunen Total JORC Resource Category Tonnes Grade Cg (%) Inferred 31,500,000 31,500,000 14.9 14.9 Note: Tonnes rounded to nearest hundred thousand tonnes. The Jalkunen graphite Mineral Resource estimate was first disclosed on 27 August 2015 in accordance with the JORC Code 2012 (ASX:TLG 27 August 2015). Deposit Kiskama Total JORC Resource Category Tonnes Inferred 7,672,000 7,672,000 Grade Cu (%) 0.25 0.25 Grade Co (%) 0.04 0.04 Grade CuEq (%) 0.36 0.36 Note: 20% geological loss applied to account for potential unknown geological losses for Inferred Mineral Resources. Tonnes rounded to nearest hundred thousand tonnes. The Kiskama copper-cobalt Mineral Resource estimate was first disclosed on 21 August 2019 in accordance with the JORC Code 2012 (ASX:TLG 21 August 2019). Raitajärvi Graphite Project, northern Sweden (Talga owns 100%) Vittangi Iron Project, northern Sweden (Talga owns 100%) Table 4 Table 6 Raitajärvi Graphite Project – JORC (2004) Resource at 5% Cg cut-off Vittangi Iron Project – JORC (2004) Resource Estimate at 15% Fe cut-off JORC JORC Resource Category Tonnes Grade Cg (%) Deposit Resource Category Tonnes Grade Fe (%) Deposit Raitajärvi Total Indicated Inferred 3,400,000 900,000 4,300,000 7.3 6.4 7.1 Note: Tonnes rounded to nearest hundred thousand tonnes. The Raitajärvi graphite Mineral Resource estimate was first disclosed on 26 August 2013 in accordance with the JORC Code 2004 (ASX:TLG 26 August 2013). It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The Company is not aware of any new information or data that materially affects the information included in the previous announcement and that all of the previous assumptions and technical parameters underpinning the estimates in the previous announcement have not materially changed. Vathanvaara Inferred Kuusi Nunasvaara Inferred Mänty Vathanvaara Inferred Sorvivuoma Jänkkä Total Inferred Inferred 51,200,000 46,100,000 16,300,000 5,500,000 4,500,000 123,600,000 36.0 28.7 31.0 38.3 33.0 32.6 Note: Tonnes rounded to nearest hundred thousand tonnes. The Vittangi Iron Mineral Resource estimate was first disclosed on 22 July 2013 in accordance with the JORC Code 2004 (ASX:TLG 22 July 2013). It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The Company is not aware of any new information or data that materially affects the information included in the previous announcement and that all of the previous assumptions and technical parameters underpinning the estimates in the previous announcement have not materially changed. Talga GroupAnnual Report 2023 24 25 Masugnsbyn Iron Project, northern Sweden (Talga owns 100%) Ore reserves Table 7 Masugnsbyn Iron Project – JORC (2004) Resource Estimate at 20% Fe cut-off JORC Deposit Resource Category Tonnes Grade Fe (%) Masugnsbyn Indicated Total 87,000,000 87,000,000 28.3 28.3 Note: Tonnes rounded to nearest hundred thousand tonnes. The Masugnsbyn iron Mineral Resource estimate was first disclosed on 28 February 2012 in accordance with the JORC Code 2004 (ASX:TLG 28 February 2012). It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The Company is not aware of any new information or data that materially affects the information included in the previous announcement and that all of the previous assumptions and technical parameters underpinning the estimates in the previous announcement have not materially changed. Talga owns 100% of one mineral asset of graphite in the JORC Probable Ore Reserve category in northern Sweden. An overview of the asset in the Group’s portfolio at 30 June 2023 is below in Table 8 and details of the project’s Mineral Reserve category is set out below in Table 9. Table 8 Talga 30 June 2023 Total Ore Reserves Tonnes Grade Ore (Mt) 2.26 2.26 Cg (%) 24.1 24.1 Contained Mineral Cg (Mt) 0.54 0.54 Project Vittangi Graphite Total Note: 1. Detailed table setting out the Probable Ore 5. Ore Reserves are of Probable Ore Reserve category is set out in table 9. Reserve category. 2. All figures are rounded to reflect appropriate 6. Ore Reserve is based on the previously levels of confidence. Apparent differences disclosed Mineral Resource estimate for may occur due to rounding. Nunasvaara South (ASX:TLG 17 3. All projects are 100% Talga owned. September 2020). 4. Mineral quantities are contained mineral. Vittangi Graphite Project, northern Sweden (Talga owns 100%) Table 9 Vittangi Project Nunasvaara Graphite Deposit – JORC (2012) Reserve at 12% Cg cut-off JORC Deposit Resource Category Tonnes Grade Cg (%) Nunasvaara Probable Total 2,260,000 2,260,000 24.1 24.1 Note: Tonnes rounded to nearest thousand tonnes. The Vittangi graphite Ore Reserve statement was first disclosed on 23 May 2019 in accordance with the JORC Code 2012 (ASX:TLG 23 May 2019) and last disclosed on 1 July 2021 in accordance with the JORC Code 2012 (ASX:TLG 1 July 2021), and is based on the previously disclosed Mineral Resource estimate for Nunasvaara South (ASX:TLG 17 September 2020). Talga GroupAnnual Report 2023 26 27 Comparison with prior year estimates Governance summary Competent persons statement Mineral Resources During the 2023 financial year, the Company made the following changes to its Mineral Resource inventory: — The Vittangi Mineral Resource update saw the Vittangi Graphite Project increase from 30.1Mt @ 24.1% Cg to 36.9Mt @ 23.1% Cg. The resource review was disclosed in April 2023 in accordance with the JORC Code 2012 (ASX:TLG 3 April 2023). The Mineral Resource estimates and Ore Reserve The information in this report that relates to Mineral The information in this report that relates to Mineral statements listed in this report are subject to Talga’s Resource Estimation for the Vittangi Graphite Project Resource Estimation for the Jalkunen and Raitajärvi governance arrangements and internal controls. Talga’s is based on information compiled and reviewed by Ms Graphite Projects, and Masugnsbyn and Vittangi Iron Mineral Resource estimates and Ore Reserve statements Katharine Masun (HBSc Geology, MSc Geology, MSA Projects is based on information compiled and reviewed are derived by Competent Persons (“CP”) with the relevant Spatial Analysis). Ms Masun is a Consultant Geologist by Mr Simon Coxhell. Mr Coxhell is a consultant to the experience in the style of mineralisation and type of at SLR Consulting (Canada) Limited and is registered Company and a member of the Australian Institute of Mining deposit under consideration and to the activity which as a Professional Geologist in the Provinces of Ontario, and Metallurgy. Mr Coxhell has sufficient experience relevant they are undertaking. Geology models in all instances are Newfoundland and Labrador, and Saskatchewan, Canada. to the styles of mineralisation and types of deposits which generated by Talga staff and are reviewed by the CP. The Ms Masun has sufficient experience relevant to the are covered in this document and to the activity which he is CP carries out reviews of the quality and suitability of the styles of mineralisation and types of deposits which are undertaking to qualify as a Competent Person as defined in All other resource estimates across the Company’s projects data underlying the Mineral Resource estimate and Ore covered in this document and to the activity which she is the 2012 edition of the “Australasian Code for Reporting of remain unchanged from the Company’s Mineral Resource Reserve statement, including a site visit. Talga management undertaking to qualify as a Competent Person as defined in Exploration Results, Mineral Resources and Ore Reserves” Statement as at 30 June 2022. conducts its own internal review of the estimate and the 2012 edition of the “Australasian Code for Reporting of (“JORC Code”). Mr Coxhell consents to the inclusion in this Ore Reserves All reserve estimates across the Company’s projects remain unchanged from the Company’s Mineral Reserve Statement as at 30 June 2022. statement to ensure that it honours the Talga geological Exploration Results, Mineral Resources and Ore Reserves” report of the matters based on this information in the form model and has been classified and reported in accordance (“JORC Code”). Ms Masun consents to the inclusion in this and context in which it appears. Mr Coxhell does not hold with the JORC Code. report of the matters based on this information in the form securities (directly or indirectly) in the Company. and context in which it appears. Ms Masun does not hold securities (directly or indirectly) in the Company. The information in this report that relates to Mineral Resource Estimation for the Kiskama Copper-Cobalt The information in this report that relates to the Vittangi Project is based on information compiled and reviewed by Graphite Project – Nunasvaara Reserve Estimate is based Mrs Elizabeth de Klerk. Mrs de Klerk is a consultant to the on information compiled and reviewed by Mr John Walker. Company. Mrs de Klerk is a member of the South African Mr. Walker is a Technical Director and Principal Mining Institute of Mining and Metallurgy (SAIMM) and a Fellow Engineer at SLR Consulting who act as consultants to of the Geological Society of Africa (GSSA) and a registered the Company. Mr Walker is a Professional Member and Professional Natural Scientist (Pr.Sci.Nat. 400090/08). Fellow of the Institute of Materials, Minerals and Mining Mrs de Klerk has sufficient experience relevant to the (Membership No.451845), a Fellow of the Institute of styles of mineralisation and types of deposits which are Quarrying (Membership No.22637) and a Fellow Member covered in this document and to the activity which she is of the Geological Society (Membership No.1021044). Mr undertaking to qualify as a Competent Person as defined in Walker is qualified from mineral reporting (QMR) and has the 2012 edition of the “Australasian Code for Reporting of sufficient experience relevant to the styles of mineralisation Exploration Results, Mineral Resources and Ore Reserves” and types of deposits which are covered in this document (“JORC Code”). Mrs de Klerk consents to the inclusion in this and to the activity which he is undertaking to qualify as a report of the matters based on this information in the form Competent Person as defined in the 2012 edition of the and context in which it appears. Mrs de Klerk does not hold “Australasian Code for Reporting of Exploration Results, securities (directly or indirectly) in the Company. Mineral Resources and Ore Reserves” (“JORC Code”). Mr Walker consents to the inclusion in this report of the matters based on this information in the form and context in which it appears. Mr Walker does not hold securities (directly or indirectly) in the Company. Talga GroupAnnual Report 2023 28 29 8. Tenement interests 11. Risks As required by ASX listing rule 5.3.3, please refer to the Schedule of Mineral Tenements for details of Talga’s interests in mining tenements held by the Company. No joint ventures or farm-in/farm-out activity occurred during the year. 9. Financial performance and financial position As a mineral explorer and advanced material developer of functional graphene and graphite enhanced products, the Group does not currently have any material operational revenue. Other income during the year consisted of interest, IUK Grants, and R&D refunds. The financial results of the Group for the year ended 30 June 2023 are: 2023 2022 2021 2020 2019 There are specific risks associated with the activities of the Delays in the permitting and approvals process are an Group and general risks that are largely beyond the control inherent risk to all mining and industrial manufacturing of the Group and the Directors. The most significant risks projects. Sweden has an established mining industry with identified that may have a material impact on the future a structured permitting process. The Company completed financial performance of the Group and the market price the extraction of the permitted 25,000 tonne graphite of the shares are: Licence and permit risk The Company’s current and future operations are subject ore from its trial mine at the Niska South deposit (Vittangi Graphite Project) in October 2022. Whilst the track record speaks to past and current successful permitting approvals, potential delays in commercial scale mining and processing permits could impact planned and/or expanded production to receiving and maintaining licences, permits and approvals schedules and delay customer contracts. from appropriate governmental authorities. In particular, the Company will require processing, exploitation and environmental permits in Sweden from time to time in connection with mining and processing. There is no assurance that any required licences, permits or approvals will be granted or that delays will not occur in connection with obtaining or renewing the licences, permits or approvals In the event that delays are incurred in obtaining a mining permit, the Company intends to utilise the ore extracted from the trial mine. If delays occur to refinery permitting, the Company will consider alternate strategies to progress the business, which may include moving the refinery operations to another jurisdiction. At the date of this report all mining and exploration permits and licenses were in good standing, however failure to obtain or renew one or more required licences, permits or approvals on a timely basis may adversely affect the Cash and cash equivalents ($) 38,226,375 13,012,565 52,497,518 5,074,819 7,666,863 necessary for the Company’s proposed operations. The primary permits required to enable development of the Net assets ($) 56,984,363 26,647,577 55,097,074 7,242,381 9,490,458 mine are an Exploitation Concession (under the Minerals Income ($) 1,993,900 664,580 3,518,060 1,192,230 1,665,368 Net loss after tax ($) (43,356,066) (36,799,320) (19,893,911) (13,416,292) (12,935,079) Loss per share (cents per share) Share Price ($) Dividend ($) (12.0) (12.1) (7.1) (5.7) (5.9) 1.48 - 1.02 - 1.33 - 0.58 - 0.48 - 10. Dividends No dividend has been paid during or is recommended for the financial year ended 30 June 2023. (30 June 2022: Nil). Act) and an Environmental Permit (under the Environmental Company’s operations. Code). Applications for the Vittangi Project Exploitation Concession and Environmental Permit were submitted in May 2020. On 21 June 2023, the Company received its Environmental Permit for its commercial battery anode refinery plant and on 17 July 2023 it received a Certificate of Finality to confirm the Environmental Permit is in force. The Swedish Land and Environment Court approved the mine Environmental Permit on 5 April 2023. A number of parties subsequently sought leave from the Swedish Land and Environment Court of Appeal (Court of Appeal) to appeal the decision. On 31 August 2023 the Court of Appeal confirmed that it had determined that there were no grounds to grant leave to appeal to any of the parties. In accordance with the statutory process, the rejected parties could appeal the Court of Appeal’s decision to the Supreme Court. The Company has been made aware that there have been appeals submitted by prior appellants. The submission period is now closed and the Supreme Court is expected to determine whether to reject or grant any party leave to appeal once a review process has been completed. The environmental permit would come into force if no leave to appeal is granted by the Supreme Court. Operating risk The proposed activities, costs and use of the Company’s cash resources are based on certain assumptions with respect to the method and timing of exploration, metallurgy and other technical tests, analysis and feasibility studies. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from the Company’s estimates and assumptions. Accordingly, no assurance can be given that the cost estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect the Company’s viability. Talga GroupAnnual Report 2023 30 31 The proposed activities of the Company including economic studies are dependent on economic inputs from commodity prices, metallurgical tests, electrochemical testing and market tests of which there is no guarantee of positive Commodity price volatility and foreign currency exchange rate risks If the Company achieves success leading to mineral economics. It is a risk that studies may not be completed or production, the revenue it will derive through the sale of may be delayed indefinitely where key inputs show negative product exposes the potential income of the Company to conditions and political trends. Whilst graphene is not The Company’s cash as at 30 June 2023 of $38.2 million currently a major focus for the Company it does not have a will provide for on-going business activities however the material effect on the Company’s performance. Company will need to seek funding options to advance economic outcomes. No assurances can be given that the Company will achieve commercial viability through the successful exploration and/or mining and processing of its mineral interests. Until the Company is able to realise value from its projects, it is likely to incur ongoing operating losses. Talga has successfully piloted its production flow sheet. It continues to conduct value improvement refinements of its flow sheet at laboratory and pilot plant level working in conjunction with key (or preferred) OEM equipment suppliers and technology providers. Investment in the Company should be considered in light of the risks, expenses and difficulties frequently encountered by companies at this stage of development, including factors such as design and construction of efficient mining and processing facilities within capital expenditure budgets. With all mining operations there can be a level of uncertainty and, therefore, risk associated with operating parameters and costs. This is also true with the scaling up of processing technology tested in pilot conditions. The nature of the technology risk is the cost of developing an economically viable commercial operation and production facility. The Company has and will continue to enter into various agreements for the Vittangi mine. Risks associated with agreements include rising contract prices as well as disputes regarding variations, extensions of time and costs, and global events impacting contractual performance and liability, all of which may give rise to delays and/or increased costs. commodity prices and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include supply and demand for minerals, technological advancements, forward selling activities, the price and availability of substitutes, the approach to pricing by competitors (i.e. aggressive pricing at or below the cost of production), and other macro-economic factors. Depressed graphite prices and/or the failure by the Company to negotiate favourable pricing terms (which terms may provide for fixed or market-based pricing) may materially affect the profitability and financial performance of the Company. Any sustained low prices for graphite (or low sale price achieved by the Company (however achieved) may adversely affect the Company’s business and financial Furthermore, foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. Prices of various commodities and services may be denominated in Swedish Krona, Euros or US dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the Australian dollar and these currencies as determined in international markets. To mitigate the Company’s exposure, currency rates are monitored regularly and funds are transferred to the foreign operations when rates are more favourable. The Company also plans to curtail this impact by paying foreign currency invoices in a timely fashion. Additional requirements for capital results and/or its ability to finance its current or planned Talga is seeking to become a vertically integrated anode and operations and capital expenditure commitments. advanced materials technology company with a strategy to Unlike the majority of base and precious metals, there is no internationally recognised market for graphite battery anode material nor is graphite battery anode material an exchange potential cashflows. traded commodity; it is determined by actual transactions The Company’s capital requirements depend on numerous between buyers and sellers. As a result, there is a lack of factors. Depending on the Company’s ability to generate market transparency associated with the price of graphite income from its operations, the Company may seek to raise battery anode material. However, there are a few major further funds through equity or debt financing, joint ventures, independent price reporting agencies that track the graphite production sharing arrangements or other means. Failure anode market. Given the range of factors which contribute to obtain sufficient financing for the Company’s activities to the price of graphite battery anode material, and the fact and future projects may result in delay and indefinite that pricing is subject to negotiation, it is particularly difficult postponement of exploration, development or production the Vittangi Anode Project. To date, the Company has announced that the European Investment Bank (EIB) board has approved €150 million senior debt funding to underpin the Project (ASX:TLG 20 June 2023). Following this approval, loan documentation is being agreed between EIB and the Company, including customary terms and conditions for a financing facility of this nature. While the Company will seek to expedite these negotiations, there can be no guarantee that they will result in a binding agreement. With the assistance of financial and transaction advisors BurnVoir, the Company will identify and evaluate potential outcomes which may emerge from ongoing project development partnership, customer and financing discussions with other European and international parties. Management has strategies to tailor budgeted cashflows based on future funding received. However, without regular income outside interest proceeds or assets sales, it will rely on continuing access to capital markets (including the exercise of unlisted Company options) to fund further development in Sweden, Germany and the UK. to expected first production. There are a wide range of factors that have the potential to influence the Company’s funding needs, a number of which are beyond the control of the Company. As a consequence, and to ensure that the Company is reacting appropriately to changing events, market conditions, and broader economic circumstances, the Company will continue to refine its funding needs on an ongoing basis and in real time. The Company remains committed to delivering the Project in a cost-effective manner, consistent with previously stated safety and schedule priorities, and will continue to apply prudent and efficient capital expenditure processes. Production guidance and targets are, as always, subject for the Company to predict with any certainty the prices at on the Company’s properties, or even loss of a property to assumptions and contingencies which are subject to which the Company will sell graphite battery anode material. interest. There can be no assurance that additional finance change as operational performance and market conditions The effect of changes in assumptions about future prices will be available when needed or, if available, the terms of the change or other unexpected events arise. Any production may include, amongst other things, changes to Mineral financing might not be favourable to the Company and might Further, the Company, in the ordinary course of its guidance is dependent on a number of factors including Resources and Ore Reserves estimates and the assessment involve substantial dilution to shareholders. maintenance and operation of the mine and plant without of the recoverable amount of the Company’s assets. The Company announced the completion of the DFS for material equipment failure, loss of continuity of experienced personnel and achievement of recovery rates from the resource. These risks are discussed in more detail elsewhere in this section. In relation to graphene, the value of graphene is affected its Vittangi Anode Project in northern Sweden in July 2021. by numerous factors and events that are external to and If the Company agrees on any near term future offtake beyond the control of the Company and similarly this is not arrangements, fast track commercial ramp up development an exchange traded commodity. The graphene price has may occur which will require additional funding to be obtained. fluctuated, such that periods of significant decline have Whilst the Company is in discussions with respect to offtake, impacted graphene businesses. These factors have and there is no guarantee such discussions will result in binding may in the future include: the level of general economic agreements (see ‘Offtake arrangements risk’ below). activity and demand; forward selling activity; and economic operations and developments, may be required to issue financial assurances, particularly insurances and bond/ bank guarantee instruments to secure statutory and environmental performance undertakings and commercial arrangements. The Company’s ability to provide such assurances is subject to external financial and credit market assessment, and its own financial position. produce value added products that would provide the most More generally, the Company is continually assessing its effective, near-term opportunities for commercialisation and ‘all in’ funding costs for development of the Project through Talga GroupAnnual Report 2023 32 33 Loan agreements and other financing arrangements such In addition, the Company expects that the sale of graphite permitted and how vigorously and consistently the regulations affect the operations, financial position and/or performance as debt facilities, convertible note issues and finance battery anode material will (at least under some sales are administered by the local authorities. There are inherent of the Company. Furthermore, the Company could lose leases (and any related guarantee and security) that may contracts) be subject to commercial verification and environmental risks in conducting exploration and mining title to, or its interest in, tenements if licence conditions be entered into by the Company may contain covenants, qualification processes to ensure any material produced activities, or industrial materials processing, giving rise to are not met or if insufficient funds are available to meet undertakings and other provisions which, if breached, may meets the specifications for supply required by customers potentially substantial costs for environmental rehabilitation, expenditure commitments. entitle lenders to accelerate repayment of loans and there is (including the industrial graphite markets and the battery damage control and losses. no assurance that the Company would be able to repay such sector). The qualification process may require approval loans in the event of an acceleration. Enforcement of any from multiple parties in the supply chain and not just security granted by the Company or default under a finance those parties with whom the Company has contractual lease could also result in the loss of assets. arrangements. Failure of the Company’s material to qualify If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations and scale back its programs or enter into joint venture arrangements to reduce expenditure and this could have a material adverse effect on the Company’s activities. Unfavourable market conditions may adversely affect the for purchase, or any unanticipated delay in qualifying the Company’s material may adversely impact the Company’s financial performance and position (including by resulting in the Company generating less revenue or profit than anticipated and/or incurring higher costs than anticipated). Company’s ability to raise additional funding regardless of Environmental and social impact constraints the Company’s operating performance. Both now and in the future, higher than expected inflation rates generally, specific to the mining industry, or specific to Sweden, may increase operating and capital expenditure costs and potentially reduce the value of future project developments. While, in some cases, such cost increases might be offset by increased selling prices, there is no assurance that this would be possible. To the extent that such offset is not possible, this could adversely impact the Company financial performance. Offtake arrangements The Company has entered into a non-binding offtake term sheet with Automotive Cells Company SE (ACC) (ASX:TLG 27 September 2022) and a non-binding letter of intent with Verkor SA (Verkor) (ASX:TLG 11 January 2023) regarding the supply of graphite anode from the Company’s Vittangi Anode Project in Sweden. While the Company will seek to execute definitive documentation as soon as reasonably The Company’s exploration, mining and processing activities will, in general, be subject to approval by governmental authorities and influence from other key stakeholders such as local communities. Development of any of the Company’s properties will be dependent on the relevant project meeting environmental guidelines and, where required, being approved by governmental authorities. In addition to the Company’s Environmental Policy, the Company has developed a formal Environmental and Social Management system to document the process for managing environmental and social risks. This is being implemented at the Company’s first operating facility, the EVA plant in Luleå, Sweden, with the Company having been awarded the globally recognised ISO 14001 certification for its environmental management systems (including onsite battery laboratories and office) in Luleå (ASX:TLG 19 October 2022). A draft Environmental and Social risk register has been prepared, which identifies, assesses and documents mitigation measures for the proposed Sweden operations. Further, while the Company will seek to secure other offtake agreements in respect of any excess production capacity not proposed to be taken by ACC or Verkor, there is no certainty that the Company will be able to enter into such agreements in a timely manner, with acceptable parties, for sufficient volumes or on reasonable terms with new customers. Any of cascading the Company’s commitment to protect labour and human rights. The Company is well aware of its environmental obligations across its operational activities in Germany, the UK and in particular Sweden, where there are various environmental requirements to complete and apply for an exploitation permit, and continues to monitor compliance. these circumstances may adversely impact the Company’s The Company must comply with all known standards, existing financial performance and position including the Company laws, and regulations which may entail greater or lesser costs generating less revenue than anticipated. and delays depending on the nature of the activity to be It is also possible that, in relation to mineral titles in which Changes in environmental laws and regulations or their the Company has an interest or will in the future acquire interpretation or enforcement may affect the Company’s such an interest, there may be areas over which legitimate operations, including the potential profitability of the rights of Indigenous groups and property owners exist. operations. Further, environmental legislation evolving IIn this case, the ability of the Company to gain access in a manner which may require stricter standards and to permits (through obtaining consent of any relevant enforcement (with associated additional compliance costs) Indigenous owner, body, group or landowner), or to progress and expose relevant operations to the increased risk of from the exploration phase to the development and mining fines and penalties for non-compliance, more stringent phases of operations may be adversely affected. The environmental assessment of proposed projects and a Company’s mineral titles may also be subject to access heightened degree of responsibility for companies and their by third parties including, but not limited to, the areas’ officers, Directors and employees. There is no assurance Indigenous people and landowners. This access could that future changes in environmental regulations, if any, will potentially impact the Company’s activities and/or may not adversely affect the Company’s operations. involve payment of compensation to parties whose existing Community relations access to the land may be affected by the Company’s activities. The Company adopts a proactive approach in engagement/consultation with local Indigenous groups The Company’s mining and graphite materials processing and landowners. The Company has successfully negotiated activities may cause issues or concerns with the local community (including local Indigenous groups) in connection with, amongst other things, the potential property rights with landowners covering the current Vittangi Project. effect on the environment as well as other social impacts Resource estimates relating to employment, use of infrastructure and community development. The Company has established ongoing engagement and management programs focused on optimising positive impacts and minimising the risk of negative impacts on the community, particularly in those parts of Sweden where the Company operates. However, these programs are not a guarantee that other issues or concerns will not arise with local communities. If such issues or concerns were to arise, this may have an adverse effect on the Company’s reputation Resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, estimates are likely to change. This may result in alterations to development and mining plans which may, in turn, adversely affect the Company’s operations. The Company engages external, independent, Competent Persons to prepare public Mineral Resource and Ore Reserve reports according to and conforming to the 2012 Joint Ore Reserves Committee (JORC) Reporting Code and Chapter 5 of the ASX listing rules. These follow standard industry guidelines on public disclosure and thus the process of Mineral title risks Mining and exploration permits are subject to periodic renewal. There is no guarantee that current or future permits or future applications for production concessions will be approved. Permits are subject to numerous determining its reserves and resources. legislation conditions. The imposition of any new conditions or the inability to meet those conditions may adversely practicable, there can be no guarantee the documentation Talga has a Social Performance Policy and Social and relationships with key stakeholders, which may in turn will be finalised. Performance Standards which will provide the structure for negatively impact its financial and operational performance. Talga GroupAnnual Report 2023 34 35 Reserve estimates Additionally, the Company’s business depends on interests in relation to its IP rights, however as stated above, Competition technology and is subject to technological change. Any the risk of third parties claiming involvement exists, which The Reserve estimates have been carefully prepared by failure or delay in developing or adopting new technology may result in litigation risks (see ‘Litigation and Infringement Competition from other international graphite producers an appropriately qualified person in compliance with the competitively may result in a reduction in customer demand risk’ below), and there can be no assurance that the and explorers may affect the potential future cash flow Joint Ore Reserves Committee (JORC) guidelines and in and in turn reduced financial and operation growth. The measures in place by the Company will be sufficient. and earnings which the Company may realise from its Talga has policies, procedures and practices in place and seeks appropriate patent, design, and trademark protection to manage any potential IP risk. Reliance on key management The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management and its key personnel. Whilst the key management team has been well established with on-going stability, there can be no assurance given that there will be no detrimental impact on the Company if one or more of these employees cease their employment or are incapacitated for any length of time. Access to infrastructure risk Mining, processing, development and exploration activities depend, to a significant degree, on adequate infrastructure. In the course of developing future mines, the Company may need to construct and/or update existing infrastructure, which includes permanent water supplies, dewatering, tailings storage facilities, power, maintenance facilities and logistics services and access roads. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could materially adversely affect the Company’s Vittangi Anode Project. This includes competition from existing production and new entrants into the market. The introduction of new mining and processing facilities and any increase in competition and supply in the global graphite market could lower the price of this commodity. The Company may also encounter competition from other mining and exploration companies for the acquisition of new projects required to sustain or increase its potential future production levels. The Company’s downstream operation may also be impacted by new entrants to the market, or existing graphite producers, pursuing a similar strategy. Litigation and infringement risk The Company may be involved in claims, litigation and disputes from time to time including in relation to contractual disputes, claims from local Indigenous groups, tenure disputes, environmental claims, occupational health and safety claims, IP disputes and employee claims. Claims, litigation and disputes can be costly, including amounts payable in respect of judgments and settlements made against, or agreed to by, the Company. They can also take up significant time and attention from management and the Board. Accordingly, the Company’s involvement in claims, litigation and disputes may have an adverse impact on its financial performance. appropriate instances are verified by independent mining Talga Group includes R&D departments to address these experts. Estimated valuations are dependent on Market technological changes and is specifically working on next Prices for the targeted ore. Mineral and exploration risk generation Li-ion batteries technologies including well advanced development plans for silicon anode. The business of exploration, project development and Technology risks mining contains risks by its very nature. To prosper, it Sensitive data relating to Talga, its employees, associates, depends on the successful exploration and/or acquisition of customers, suppliers or the development of Talga’s innovative reserves, design and construction of efficient production/ product range may be exposed resulting in a negative processing facilities, competent operation and managerial impact on the Group’s reputation or competitive advantage. performance and proficient marketing of the product. In Policies, procedures and practices are in place to ensure particular, exploration is a speculative endeavour and certain security of this data. Talga and its subsidiaries recognise the circumstances, cost overruns and other unforeseen events importance of data privacy, and comply with relevant data can hamper exploration and mining operations. privacy regulations, including the EU General Data Protection Mining of the Vittangi deposits is currently proposed to be via conventional drill and blast (open-cut for Nunasvaara Regulation, to safeguard the security and privacy of data. South and underground operation for Niska). The well- Intellectual property risk Talga continues to invest significantly in product development and innovation and the success of the Company’s graphite processing business depends, in part, on its continued ability to protect its intellectual property (IP) including trademarks to increase brand awareness, its trade secrets and patents on its products and production processes. The Company has 15 active patent families encompassing 65 active cases (10 granted patents and 55 pending/under examination) that relate to processing graphite for Li-ion batteries as well as graphene products. established mining industry in Sweden ensures good drill and blast and mining contractor capability, mobile and fixed plant supply, mining supplies and operator training and the mining project risk is considered low. There is also a risk that unforeseen geological or geotechnical issues may be encountered when developing and mining ore reserves, such unusual or unexpected geological conditions. As a consequence of any such event, a loss of revenue may be caused due to the lower than expected production or higher than anticipated operation and maintenance costs and/or ongoing unplanned capital expenditure in order to meet production targets. Development and commercialisation The Company’s ability to generate revenues from its multiple anode and graphene products in the future will be subject to a number of factors, including but not limited to the technologies performing to a level sufficient to warrant commercialisation. The development, testing and Within the industry that the processing business operates, manufacture of novel technologies is a high risk industry there exists an ongoing risk of third parties claiming and whilst the Company has confidence in the development involvement in technological discoveries. The Company has and results to date there is no guarantee that the Company taken steps to protect and confirm its interest in its IP and will be able to successfully commercialise the products will endeavour to implement all reasonable processes to (including in a profitable sense). protect its IP. The Company is not aware of any third-party Given the dependence of the Company on IP and the quality operations, financial condition and results of operations. Any of its products and brands, and whilst the Company has IP such issues arising in respect of the supporting infrastructure management systems and processes in place, in the event or on the Company’s sites could materially adversely affect that the Company is unable to protect its IP adequately, the Company’s results of operations or financial condition. then the value of the Company’s products and brands Furthermore, any failure or unavailability of the Company’s could be adversely affected. This may further impact overall operational infrastructure (for example, through equipment business, with respect to its financial position and overall failure or disruption to its transportation arrangements) profitability and operational output. could materially adversely affect its exploration activities or development of a mine or project. Talga GroupAnnual Report 2023 36 37 Pandemic risk Whilst all these risks associated with climate change may significantly change the industry in which the Company 12. Subsequent events Supply chain disruptions resulting from the transmission of pandemics such as COVID-19 in the community and measures implemented by governments around the world operates, production of Talga’s flagship lithium-ion battery anode product, Talnode®-C, emits 92% less CO2-equivalent than incumbent electric vehicle battery anode materials to limit the transmission of the virus may adversely impact largely due to avoiding the use of fossil-fuel power to either the Company’s operations, financial position, prospects and produce natural graphite anode or graphitise petroleum/coal ability to raise capital. Travel bans may also lead to shortages derived feedstocks for energy intensive synthetic graphite of skilled personnel. Further outbreaks of COVID-19 or other anode production, as is the case with anode technology pandemics and the implementation of travel restrictions currently imported into Europe from Asia. This emissions also have the potential to restrict access to sites. Whilst the reduction was announced on the ASX on 9 August 2023 and COVID-19 pandemic has had both short-term and long- is based on an independent Life Cycle Assessment. — Early works in preparation for Luleå Anode The Company has identified air emissions and greenhouse gases in the environmental impact assessment (EIA) process for the proposed mine. Mitigation measures have been identified for reducing dust and greenhouse gas emissions. Further EIA process for the refinery which includes best — Updated Life Cycle Assessment demonstrates global available technology air emission treatment technologies, warming potential of Talnode®-C manufacture is 92% was completed in 2022. less than existing synthetic EV anodes imported into Europe. Other than as disclosed below, there has not been any other — Final stage of statutory appeals process commenced matter or circumstance occurring subsequent to the end with Supreme Court reviewing submissions following of the financial year that has significantly affected or may the Court of Appeal’s decision to uphold Talga’s significantly affect the operations of the Group, the results approved Nunasvaara South mine environmental and of those operations, or the state of affairs of the Group in Natura 2000 permit. future financial years. Refinery construction commenced following approved environmental permit gaining legal force. Groundbreaking attended by local, regional and — Early-stage discovery of lithium-bearing pegmatites at national Swedish government representatives. Talga’s Aero Project. — Banking consortium of credit agencies and European commercial banks selected to provide all debt funding for Vittangi Anode Project, complementing European Investment Bank. term consequences that Talga, like other companies, must take into account, there have been no significant adverse impacts on the Company to date. The Company may also be subject to the severity of future lockdowns and relevant operators/supplier personnel not becoming infected which could result in delays. Climate change risk Climate change is a risk the Company has considered. The climate change risks particularly attributable to the Company include: — the emergence of new or expanded regulations associated with the transitioning to a lower-carbon economy and market changes related to climate change mitigation. The Company may be impacted by changes to local or international compliance regulations related to climate change mitigation efforts, or by specific taxation or penalties for carbon emissions or environmental damage. These examples sit amongst an array of possible restraints on industry that may further impact the Company and its profitability. While the Company will endeavour to manage these risks and limit any consequential impacts, there can be no guarantee that the Company will not be impacted by these occurrences; and — climate change may cause certain physical and environmental risks that cannot be predicted by the Company, including events such as increased severity of weather patterns and incidence of extreme weather events and longer-term physical risks such as shifting climate patterns. Talga GroupAnnual Report 2023 38 39 13. Directors’ and committee meeting 14. Environmental regulations The number of meetings attended by each of the Directors of the Group during the The Group’s operations are subject to local, State and The Group aims to ensure the appropriate standard of financial year was: Directors Directors’ Meetings Terry Stinson Mark Thompson Grant Mooney Stephen Lowe Ola Rinnan Remuneration Committee Meetings Terry Stinson Grant Mooney Stephen Lowe Ola Rinnan Audit and Risk Committee Meetings Grant Mooney Terry Stinson Stephen Lowe Number Eligible to Attend Number Attended 7 7 7 7 7 2 2 2 2 1 1 1 7 7 6 7 7 2 2 2 2 1 1 1 Federal laws and regulations concerning the environment. environmental care is achieved, and in doing so, that it Details of the Group’s performance in relation to is aware of and is in compliance with all environmental environmental regulations are as follows: legislation. The Directors of the Group are not aware of any The Group’s exploration activities are subject to the Swedish Minerals Act (“Minerallagen”) and operational activities in breach of environmental legislation for the financial year under review. Germany are subject to the German Federal Emissions For the year ending 30 June 2023, the Group was below Control Act (Bundes-Immisionsschutzgesetz) and the AwSV the reporting threshold requirements under the Australian Regulations relating to water discharge. The Group has a National Greenhouse Emission Regulation (“NGER”) to policy of complying with or exceeding its environmental report its annual greenhouse gas emissions and energy performance obligations. The Board believes that the Group use and is therefore not required to register or report. The has adequate systems in place to meet its obligations. Directors will continue to monitor the Group’s registration and reporting obligations. 15. Share options and performance rights As at the date of this report, there were 7,500,000 ordinary No person entitled to exercise any option or performance shares under option and 4,947,900 shares subject to right referred to above has or had, by virtue of the option or performance rights: performance right, a right to participate in any share issue of — 5,000,000 unlisted options with an exercise price of $1.12 expiring on 31 December 2023; any other body corporate. During or since the end of the financial year 3,400,000 share options with an exercise price of $0.71 expired on — 500,000 unlisted options with an exercise price of 23 October 2022. $1.93 expiring on 4 July 2024; — 2,000,000 unlisted options with an exercise price of $2.16 expiring on 14 September 2024; — 2,100,000 performance rights expiring 31 December 2023; — 2,000,000 performance rights expiring 31 December 2025; and — 847,900 performance rights expiring 31 March 2025. Talga GroupAnnual Report 2023 40 41 16. Remuneration report (audited) This report details the type and amount of remuneration for each Director and Key Management Personnel (“KMP”) (defined as those having authority and responsibility for planning, directing and controlling the activities of the Group). Remuneration Policy The performance of the Group depends upon the quality of its Directors and Executives. To be successful, the Group must attract, motivate and retain highly skilled Directors and Executives. Non-Executive Director remuneration The maximum remuneration of Non-Executive Directors is the subject of shareholder resolution in accordance with the Company’s Constitution, and the Corporations Act 2001 as applicable. The allocation of Non-Executive Director remuneration within that maximum will be made by the Remuneration Committee having regard to the inputs and value to the Group of the respective contributions by each Non-Executive Director. Shareholders at a general meeting approved an aggregate amount of $500,000 to be paid to Non-Executive Directors. The Board, upon consultation with It is the Group’s objective to provide maximum stakeholder the Remuneration Committee, may allocate this pool (or part benefit from the retention of a high-quality board and of it) at their discretion. KMP by remunerating them fairly and appropriately with reference to relevant employment market conditions. The Board links the nature and amount of some Director and KMP emoluments to the Group’s financial and operational performance. To assist in achieving this objective the Board set up a Remuneration Committee. The responsibilities of the Remuneration Committee are to: The Remuneration Committee may recommend awarding additional remuneration to Non-Executive Directors called upon to perform extra services or make special exertions on behalf of the Group such as representation on committees. There is no scheme to provide retirement benefits, other than statutory superannuation, to Non-Executive Directors. — Attract, retain and motivate high quality Directors and KMP; Executive remuneration Executive remuneration may consist of both fixed and — Reward Directors and KMP for Group performance; variable (at risk) elements. — Align the interest of Directors and KMP with those of shareholders; Fixed remuneration — Link reward with strategic goals and performance of the Group; and The level of fixed remuneration is set so as to provide a base level of remuneration which is appropriate to the position and is competitive in the market and may be in variety of — Ensure total remuneration is competitive with forms including cash and fringe benefits. The remuneration market standards. is reviewed annually by the Remuneration Committee. The remuneration of a Director or KMP will be decided by the Remuneration Committee. In determining competitive remuneration rates the Remuneration Committee reviews local and international trends among comparative companies and the industry generally. It also examines terms and conditions for the employee share option plan. The Remuneration Committee also relies on remuneration consultants from time to time. Remuneration consultants were used this year. BDO Australia were paid a total of $31,750 for consulting services concerning an employee incentive and retention scheme and Director incentives. Variable (at risk) remuneration Variable remuneration may be delivered in the form of a short-term incentive (STI) scheme, cash bonuses or long- term incentive schemes including share options or rights. All equity-based remuneration paid to Directors and Executives is valued at the cost to the Group and expensed. Options and performance rights are valued using the Black-Scholes methodology. All equity-based remuneration for Directors must be approved by shareholders. Annual Report 2023Talga Group 42 43 Performance Based Remuneration by the Company, Mr Thompson will not be entitled to any The table below outlines the KMP of the Group for this financial year: Directors Position Term as KMP Non-Executive Directors Terry Stinson Non-Executive Chair Full financial year Grant Mooney Non-Executive Director Full financial year Stephen Lowe Non-Executive Director Full financial year Ola Rinnan Non-Executive Director Full financial year Executive Directors Mark Thompson Managing Director Full financial year Senior Executives Melissa Roberts Chief Financial Officer Full financial year Martin Phillips Chief Operating Officer Full financial year Other than as noted below under Services Agreements of notice of termination or payment in lieu of notice. Executive Directors and KMP, the Group did not pay any other performance based bonuses to Directors or KMP in the year ended 30 June 2023. Group Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration The remuneration policy has been tailored to maximise the commonality of goals between shareholders, Directors and Executives. The method applied in achieving this aim to date has been the issue of options or performance rights to Directors and Executives under the Company’s Employee Securities Incentive Scheme to encourage the alignment of personal and shareholder interests. Furthermore, STI’s in the form of cash bonuses that are structured to remunerate KMP for achieving annual Group targets and individual performance targets that reflect the Group’s development path and that can translate into long-term value being created for shareholders have also been considered and Martin Phillips’ conditions as Chief Operating Officer (COO) are defined by way of a contract of employment with no fixed term. Mr Phillips’ Base Salary and superannuation is $452,045. His STI’s have been agreed based on the four key performance milestones covering Commercial Agreements, Joint Venture/Corporate Development, Vittangi Permit milestones and Market Capitalisation targets, up to a maximum at risk total of $200,000 (including superannuation). A total STI amount of $15,000 was paid to Mr Phillips in the 2023 financial year. The STI bonus was determined on 1 November 2022 after performance reviews were completed and approved. Mr Phillips is predominately located in Europe and is also entitled to six return airfares for immediate family members per year $19,724 in airfare benefits (excluding Fringe Benefits tax) were paid in FY23. Mr Phillips is also the European Chief Executive Officer. implemented. The Group believes this policy will be the most The Company may terminate Mr Phillips’ employment effective in increasing shareholder wealth. contract without cause by providing six months written Services Agreements of Executive Directors and KMP Mark Thompson’s employment conditions as Managing Director are defined by way of a contract of employment with no fixed term. Mr Thompson’s annual Base Salary and superannuation is $452,049. His STI’s have been agreed based on the four key performance milestones covering Commercial Agreements, Joint Venture/Corporate Development, Mineral Resource Upgrades and Market Capitalisation targets, up to a maximum at risk total of $135,000 (including superannuation). A total STI amount of $15,000 was paid to Mr Thompson in the 2023 financial year. The STI bonus was determined on 1 November 2022 after performance reviews were completed and approved. The Company may terminate Mr Thompson’s employment contract without cause by providing nine months written notice or making payment in lieu of notice, based on the individual’s annual salary component. Mr Thompson may terminate his employment without cause by providing six months written notice and the Company may pay Mr Thompson in lieu of notice or require him to serve out his notice. In the event of a change in control of the Company, Mr Thompson will receive a bonus payment comprising of a lump sum gross payment of 12 months’ Base Salary. If within 6 months after the change in control Mr Thompson elects to terminate his employment or his employment is terminated notice or making payment in lieu of notice, based on the individual’s annual salary component. Mr Phillips may terminate the employment without cause by providing six months written notice and the Company may pay Mr Phillips in lieu of notice or require him to serve out his notice. Melissa Roberts’ conditions as Chief Financial Officer (CFO) are defined by way of a contract of employment with no fixed term. Ms Roberts’ Base Salary and superannuation is $401,822. Her STI’s have been agreed based on the three key performance milestones covering Joint Venture/Corporate Development, Corporate and Market Capitalisation targets, up to a maximum at risk total of $120,000 (including superannuation). A total STI amount of $45,000 was paid to Ms Roberts in the 2023 financial year. The STI bonus was determined on 1 November 2022 after performance reviews were completed and approved. No STI was paid to Ms Roberts in the 2022 financial year. The Company may terminate Ms Roberts’ employment contract without cause by providing six months written notice or making payment in lieu of notice, based on the individual’s annual salary component. Ms Roberts may terminate the employment without cause by providing six months written notice and the Company may pay Ms Roberts in lieu of notice or require her to serve out her notice. Talga GroupAnnual Report 2023 44 45 Details of Remuneration Details of the remuneration of the Directors, other Key Management Personnel (defined as those who have the authority and responsibility for planning, directing and controlling the major activities of the Group) and specified Executives of Talga are set out in the following tables. Short term benefits Post-employment Share-based payments Director’s resolution. Total including Notes: All Directors are paid under the terms agreed by way of Salary $ Directors Fees $ Non-monetary leave entitlements (ii) $ Other (i) $ Super- annuation $ Subtotal $ Options and Rights (iii) $ Value of at risk share-based payment as proportion of remun- eration % Total $ - 150,000 4,525 - 16,225 170,750 347,000 517,750 67% (i) Grant Mooney was paid $4,525 (plus superannuation) (iii) Option and rights represent the fair value expensed for as Chair of the Remuneration Committee and $2,262 the year ended 30 June 2023; for options issued to Mark (plus superannuation) as a member of the Audit and Thompson in November 2020; for options/performance rights Risk Committee. Stephen Lowe was paid $4,525 (plus issued to Martin Phillips in October 2019, September 2020, superannuation) as Chair of the Audit and Risk Committee November and December 2022; for options/performance and $2,262 (plus superannuation) as a member of the rights issued to Melissa Roberts in September 2021 and Remuneration Committee. Terry Stinson was paid $4,525 December 2022; for performance rights issued to the Chair (plus superannuation) as a member of both the Remuneration and Non-Executive Directors in November 2020. Options Committee and Audit and Risk Committee. Ola Rinnan was and Rights expensed for Martin Phillips is the net after paid $2,500 as a member of the Remuneration Committee. including a reversal of shared based payments expense of Mark Thompson was paid a $15,000 STI bonus in the period $1,122,000 which relates to 3,000,000 options that expired 426,753 - 15,000 11,646 25,296 478,695 1,652,000 2,130,695 78% relating to a 2022 financial year project development unvested in the current year. - 66,364 6,787 - 7,681 80,832 289,167 369,999 78% Roberts was paid a $45,000 STI bonus in the period relating 2023 financial year. to a 2022 financial year corporate milestone. (ii) Non-monetary leave entitlements are the net movement of the balance of accrued annual and long-service leave entitlements. (v) Ola Rinnan’s Director fees includes $20,000 for representation on the subsidiary Talga AB board. milestone. The $52,215 paid to Martin Phillips was for $37,215 in fringe benefits (including fringe benefits tax) and a $15,000 STI bonus in the period relating to a 2022 financial year project development milestone. Melissa (iv) Part of Martin Phillips’ remuneration is paid through Talga’s German subsidiary and hence due to tax equalisation between Australia and Germany, Mr Phillips was paid a total annual base salary and superannuation of $480,671 for the - 66,364 6,787 - 7,681 80,832 289,167 369,999 78% - 93,332 2,500 - - 95,832 289,167 384,999 75% 2023 Terry Stinson Chair Mark Thompson Managing Director Grant Mooney Non-Executive Director Stephen Lowe Non-Executive Director Ola Rinnan Non-Executive Director (v) Martin 455,375 - 52,215 1,309 25,296 534,195 526,921 1,061,116 76% Phillips Chief Operating Officer (iv) Melissa 376,526 - 45,000 7,598 25,296 454,420 588,348 1,042,768 56% Roberts Chief Financial Officer Total 1,258,654 376,060 132,814 20,553 107,475 1,895,556 3,981,770 5,877,326 Talga GroupAnnual Report 2023 Short Term Benefits Post-Employment Share-based payments of Director’s resolution. Total including Notes: All Directors are paid under the terms agreed by way 47 Salary $ Directors Fees $ Non-monetary leave entitlements (vii) $ Other (vi) $ Super- annuation $ Subtotal $ Options and Rights (viii) $ Value of at risk share-based payment as proportion of remun- eration % Total $ - 150,000 4,545 - 15,455 170,000 347,000 517,000 67% 426,432 - 150,000 23,882 23,569 623,883 1,652,000 2,275,883 73% - 66,364 6,818 - 7,318 80,500 289,167 369,667 78% - 66,364 6,818 - 7,318 80,500 289,167 369,667 78% - 93,000 2,500 - - 95,500 289,167 384,667 75% (vi) Grant Mooney was paid $4,545 (plus superannuation) (vii) Non-monetary leave entitlements are the net movement as Chair of the Remuneration Committee and $2,273 of the balance of accrued annual and long-service leave (plus superannuation) as a member of the Audit and entitlements. Risk Committee. Stephen Lowe was paid $4,545 (plus superannuation) as Chair of the Audit and Risk Committee and $2,273 (plus superannuation) as a member of the Remuneration Committee. Terry Stinson was paid $4,545 (plus superannuation) as a member of both the Remuneration Committee and Audit and Risk Committee. Ola Rinnan was paid $2,500 as a member of the Remuneration Committee. Both Mark Thompson and Martin Phillips were paid a $150,000 STI bonus in the period relating to the 2021 financial year market capitalisation milestones. (viii) Option and rights represent the fair value expensed for the year ended 30 June 2022; for options issued to Mark Thompson in November 2020; for options issued to Martin Phillips in October 2019 and September 2020; for options issued to Melissa Roberts in September 2021; for performance rights issued to the Chair and Non-Executive Directors in November 2020. (ix) Due to tax equalisation, Martin Phillips was paid a total annual base salary and superannuation of $478,625 for the 2022 financial year. (x) Ola Rinnan’s Director fees includes $20,000 representation on the subsidiary Talga AB board. 46 2022 Terry Stinson Chair Mark Thompson Managing Director Grant Mooney Non-Executive Director Stephen Lowe Non-Executive Director Ola Rinnan Non-Executive Director (x) Martin 455,057 - 150,000 68,938 23,568 697,563 526,308 1,223,871 43% Phillips Chief Operating Officer (ix) Melissa 333,333 - - 13,516 33,333 380,182 367,067 747,249 49% Roberts Chief Financial Officer Total 1,214,822 375,728 320,681 106,336 110,561 2,128,128 3,759,876 5,888,004 Talga GroupAnnual Report 2023 49 Balance at end of year 175,554 14,354,901 - 2,050,000 - 229,950 - 48 Option, rights and shareholdings of Directors and Officers Key Management Personnel Shareholdings 2022 The number of options and performance rights over ordinary shares in Talga held by Key Management Personnel of the Group during the financial year is as follows: Key Management Personnel Options and Rights 2023 30 June 2023 Balance at beginning of year Granted as remuneration during the year Exercised during the year Other changes during the year (i) Balance at end of year Vested during the year Vested and exercisable Terry Stinson 600,000 Mark Thompson 4,000,000 Grant Mooney Stephen Lowe Ola Rinnan 500,000 500,000 500,000 - - - - - - - - - - - - - - - 600,000 4,000,000 500,000 500,000 500,000 - - - - - - - - - - Martin Phillips 4,000,000 2,000,000 (500,000) (3,000,000) 2,500,000 500,000 500,000 Melissa Roberts 2,000,000 500,000 - - 2,500,000 - - (i) These are options that expired unvested during the year. The number of ordinary shares in Talga held by Key Management Personnel of the Group during the financial year is as follows: Key Management Personnel Shareholdings 2023 30 June 2023 Terry Stinson Balance at beginning of year 175,554 Mark Thompson 14,354,901 Grant Mooney - Stephen Lowe 2,050,000 Ola Rinnan - Martin Phillips 229,950 Melissa Roberts - Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year (i) Balance at end of year - - - - - - - - - - - - 500,000 - 1,818 177,372 27,273 14,382,174 - - 27,273 2,077,273 - - - - 729,950 - (i) Issue of shares as a result of Share Purchase Plan allotment. 30 June 2022 Terry Stinson Balance at beginning of year 175,554 Mark Thompson 14,354,901 Grant Mooney - Stephen Lowe 2,050,000 Ola Rinnan - Martin Phillips 229,950 Melissa Roberts - Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year - - - - - - - - - - - - - - - - - - - - - Share based payments The following table summarises the value of options or rights granted, expensed, and exercised during the financial year, in relation to options or rights granted to Key Management Personnel as part of their remuneration: Key Management Personnel Granted in year $ Value of options and rights expensed during year $ Value of options exercised in year $ Terry Stinson Mark Thompson Grant Mooney Stephen Lowe Ola Rinnan Martin Phillips - - - - - 347,000 1,652,000 289,167 289,167 289,167 - - - - - 2,800,000 526,921 675,000 Melissa Roberts 715,000 588,348 - Talga GroupAnnual Report 2023 50 51 Additional disclosures relating to options, performance rights and shares The table below discloses the number of share options and performance rights as at 30 June 2023 granted to Key Management Personnel as remuneration as well as the number of options that vested or lapsed during this year. Share options do not carry any voting or dividend rights and can be exercised once the vesting conditions have been met until their expiry date. As at 30 June 2023 Grant date Number of options / rights awarded Fair value per option / right at award date Vesting date Exercise price Expiry date No. vested during this year No. lapsed during this year $1.12 31/12/23 - - 18. Auditor’s independence declaration The Auditor’s independence declaration for the year ended 30 June 2023 has been received and immediately follows the Directors’ Report. On 6 July 2023, Stantons International resigned as Auditor of the Company, and Ernst & Young was appointed as Auditor of the Company. There were $48,308 fees paid to Ernst & Young for non-audit services (Stantons International $40,918) provided during the year ended 30 June 2023. The Directors are satisfied that the provisions of non-audit services during the year is compatible with the general standard of independence for Auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed did not compromise the external Mark Thompson 12/11/20 4,000,000 $1.239 Martin Phillips 24/10/19 3,000,000 $0.374 Martin Phillips 24/09/20 1,000,000 $0.495 Terry Stinson 12/11/20 600,000(i) $1.735 Stephen Lowe 12/11/20 500,000(i) $1.735 Grant Mooney 12/11/20 500,000(i) $1.735 Ola Rinnan 12/11/20 500,000(i) $1.735 Melissa Roberts 16/09/21 2,000,000 $0.696 Martin Phillips 14/11/22 1,500,000(i) $1.390 Martin Phillips 23/12/22 500,000(i) $1.430 Melissa Roberts 23/12/22 500,000(i) $1.430 * Subject to vesting conditions as described in note 26. (i) Performance rights granted. * * * * * * * * * * * $0.71 23/10/22 - 3,000,000 Auditor’s independence. $1.12 31/12/23 - - - - 31/12/23 31/12/23 31/12/23 31/12/23 $2.16 14/09/24 - - - - - - - - - 31/12/25 500,000 31/12/25 31/12/25 - - - - - - - - - - - 19. Corporate governance In recognising the need for the highest standards of corporate behaviour and accountability, the Directors support and have adhered to principles of sound corporate governance. The Board recognises the recommendations of the Australian Securities Exchange Corporate Governance Council and considers that Talga is in compliance with those guidelines which are of critical importance to the commercial operation and commensurate of an ASX listed company of its size. During the financial year, shareholders continued to receive the benefit of an efficient and cost-effective corporate governance policy for the Group. This report is made in accordance with a resolution of the Directors. 17. Indemnification and insurance Indemnification and insurance of Directors and officers Indemnification of Auditors To the extent permitted by law, the Company has agreed to The Group paid a premium of $176,625 (2022: $110,264) indemnify its Auditors, Ernst & Young, as part of the terms to insure Directors and officers of the Group. The of its engagement agreement against claims by third parties Directors and officers have indemnities in place with the arising from the audit (for an unspecified amount). No Group whereby the Company has agreed to indemnify payment has been made to indemnify Ernst & Young during the Directors and officers in respect of certain liabilities or since the financial year. incurred by the Director or officer while acting as a Director of the Group and to insure the Director or officer against certain risks the Director or officer is exposed to as an officer of the Group. Mark Thompson Managing Director Perth, Western Australia 29 September 2023 Talga GroupAnnual Report 2023 52 53 Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Auditor’s independence declaration to the directors of Talga Group Ltd As lead auditor for the audit of the financial report of Talga Group Ltd for the financial year ended 30 June 2023, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Talga Group Ltd and the entities it controlled during the financial year. Ernst & Young T S Hammond Partner 29 September 2023 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2023 54 55 Sustainability and people Talga GroupAnnual Report 2023 56 57 At Talga, sustainability is fundamental to every part of our business and operations. With our industry-leading anode technology and world-class natural graphite resources, we aim to enable the world’s most sustainable batteries and consumer products through innovative graphitic materials. We are committed to operating sustainably across our Vittangi Anode Project in northern Sweden, research and development facility in the UK, processing operations in Germany, and Group head office in Australia. This report communicates our progress on our sustainability initiatives over the last 12 months (“Reporting Period”). How we approach sustainability Our sustainability work program covers three focus areas: Talga is currently implementing a plan to meet TCFD environment; people and communities; and long-term value. standards. In June 2023 the International Sustainability These are based on a review of internal factors including our Standards Board (ISSB) issued the inaugural International risk profile and operational portfolio, and external factors Sustainability Disclosure Standards and during the coming such as our regulatory environment, customer, supplier and period Talga is working towards aligning its systems and partner interests, local community and other stakeholder processes with the ISSB Standards and will continue interests, the views of ratings agencies and the standards tracking the emerging sustainability reporting compliance set by external sustainability initiatives (such as the United requirements. Furthermore, Talga’s European operations Nations’ Sustainable Development Goals). and entities are expected to meet the threshold of Our significant economic, environmental, and social risks were plotted in the 2022 Materiality Matrix. The Materiality Matrix provides a holistic view of the relative significance of our impacts and associated risks and opportunities and follows the process in alignment with the Global Reporting requirement to report in accordance with the European Sustainability Reporting Standards (ESRS) in future years. Talga is committed to the EU Principles for Sustainable Raw Materials in establishing and operating its vertically integrated mine-to-anode business. Initiative (GRI) framework. Our broad ESG objectives ensure that our business strategy takes account of significant social and environmental topics and operationalises and embeds management of our material issues throughout our business. We remain focused on continual improvement, exploring opportunities and finding tangible solutions to help us progress towards our goals in 2024. The table overpage summaries Talga’s work program across the three focus areas and progress over the Reporting Period. With our industry-leading anode technology and world-class natural graphite resources, we aim to enable the world’s most sustainable batteries and consumer products Talga GroupAnnual Report 2023 58 59 Objective Opportunity Broad target Our progress Environment Minimise environmental impact and Implementation of Environmental and Social Continue to develop our systems to the requirements of ISO 14001 and ISO Ongoing pollution of operations. Management Systems. 26000. Talga aims to achieve ISO 14001 certification for our German and UK facilities and alignment with ISO 26000 across all Talga during the 2023/2024 Reporting Period. Achieve ISO 14001 certification for EVA Plant. Achieved Minimise GHG/CO2 emissions. Use of low-emission sources of energy. Continue to use renewable energy in EVA Plant. Achieved and ongoing Undertake climate action including Voluntary TCFD reporting. Implement a plan to meet TCFD standards. physical risk assessments. Explore innovation and circular economy Partnership opportunities. Continue R&D and partnership building. opportunities. Undertake company-wide greenhouse gas emission inventory. Underway Underway Ongoing Map resource flows within our production processes to identify circular Underway economy opportunities. Develop Life Cycle Assessment Life Cycle Assessments and R&D. Continue to explore R&D opportunities and undertake new Life Cycle Achieved and ongoing of products. Assessments of products and update existing assessments at appropriate times. People and Communities Support sustainable community Create positive health and wellbeing, Continue to build relationships and develop partnerships with local stakeholders. Ongoing development. educational and employment outcomes. Sponsor community development opportunities with our host communities. Ongoing Show leadership in mining and supply Positively influence entire value chain. Demonstrate best practice environmental and social management and assess Ongoing chain human rights. value chain for partnership opportunities. Zero harm to people. Deliver industry leading health and safety performance and public health and safety protection. Make zero harm a priority and part of Talga’s culture. Implement best practice Ongoing health and safety management, and community and worker health and well-being programmes. Development of a holistic supply chain and governance strategy. Underway Long-term value Ensure safe and sustainable site Deliver industry leading sustainability Implement Safety Management Standard and Framework and staff training. Underway operations. performance. Talga aims to achieve ISO 45001 certification (health and safety management system) across our EVA plant, Luleå office, Stockholm office, German facility and UK facility during the 2023/2024 Reporting Period. Contribute to local employment and Maximise community employment and Continue to investigate the development of community training and Achieved and ongoing workforce upskilling. upskilling opportunities. development programs. Be a market leader in battery Positively influence entire value chain. Supply battery industry with locally sourced, low greenhouse gas emission Ongoing anode industry. battery anode material. Talga GroupAnnual Report 2023 60 Environment 61 Climate change In designing the Nunasvaara South mine, Talga implemented During the Reporting Period the Niska South trial mine was numerous measures to reduce the possibility of impact on completed. The trial mine activities were a success, with We are working on identifying and arranging biodiversity offsets to result Talga acknowledges the changing global climate and the downstream Natura 2000 area. These design choices the successful extraction of the permitted quantity of ore, in at least accepts the Intergovernmental Panel on Climate Change contributed to Talga being granted a Natura 2000 permit implementation of environmental controls and monitoring assessment of climate science. in April 2023. We support the intent of the Paris Agreement to limit global Talga has modified the Nunasvaara South mine site layout warming to well below 2 degrees above pre-industrial levels. to avoid impacts on high value biodiversity areas, which will Our anode materials will be an important factor in the be protected during and after Talga’s mining operations. global green transition, including Sweden’s commitment to As well as the biodiversity impact avoidance measures and have net zero emissions by 2045. In addition, our battery rehabilitation measures incorporated within the Vittangi and learnings that are already being incorporated into the front end engineering design (FEED) and detailed design of the Nunasvaara South mine. Talga was pleased to receive acceptance of the rehabilitation of the site (after the end of the Reporting Period) from Kiruna Municipality, the supervising authority. anode operation will provide an environmentally responsible, Anode Project, we are working on identifying and arranging Talga’s selected site for the Anode Refinery is within the economically valuable and socially beneficial new industry biodiversity offsets (also called compensation measures) Luleå Industrial Park. This park was developed by Luleå in northern Sweden. to result in at least a net 15% increase in biodiversity value. Municipality with nature zones in place to protect the higher a net 15% increase in biodiversity value within the Vittangi Anode Project To this end, we are proud to be a project partner for CLIMB, value riparian vegetation areas. We are currently assessing the vulnerability of our operations and the communities in which we operate to the threat of climate change. Environmental stewardship A core tenet of Talga’s operations is the responsible use and protection of the natural environment. This principle is actively employed throughout all our operations. Reducing impact across our operations Talga’s operations, from our mining activities to downstream anode production, are designed to minimise environmental impact. Our planned Nunasvaara South mine will implement several leading tailings and waste management practices including the creation of a secure, integrated waste facility. These practices include backfilling mine voids once ore extraction is complete. Talga’s waste management plan for the Nunasvaara South mine development meets the MWEI BREF1. a methodology to evaluate biodiversity in a transparent and comparable way. Talga is also a participant in the Vinnova-funded Waste2Place project. The Waste2Place project aims to create long-term stable landforms to help to deliver land previously used for mining back to nature and people. This will be achieved through innovations that strengthen and expand the emerging Swedish geomorphic design knowledge and practical experience In environmental impact assessments and trial mining, we to significantly improve the technology, products, and have conducted robust monitoring of dust and noise levels to processes around it. Talga views involvement in the ensure minimal environmental impact. In addition, we employ Waste2Place project as an important step in adapting stringent wastewater treatment to ensure that surface and international best practices in land restoration to the ground water quality remain unaffected by our activities. climatic, landscape and soil conditions of northern Sweden. The development of these techniques and practices will be important for Talga’s closure plans and future post-mining outcomes. 1 Best Available Techniques (BAT) Reference Document for the Management of Waste from Extractive Industries, in accordance with Directive 2006/21/EC; EUR 28963 EN; Publications Office of the European Union, Luxembourg, 2018; ISBN 978-92-79-77178-1; doi:10.2760/35297, JRC109657. In September 2022 Talga also achieved ISO 14001 certification for the EVA Plant at Luleå. Furthermore, in the first half of 2023 Talga initiated a process of extending our environmental management system across our German and UK facilities, targeting achievement of ISO 14001 certification during H1 2024. Environmental permitting In preparation for our environmental permit application, Talga undertook significant site-specific investigations over multiple years and assessed the impacts of both our Nunasvaara South mining operation and our proposed Anode Refinery to be built at the Luleå Industrial Park. These studies helped inform site environmental management and mitigation measures to realise positive opportunities and minimise consequences of environmental risks. During the Reporting Period, an environmental permit was granted and entered into legal force for the Luleå Anode Refinery. The Nunasvaara South mine was granted an environmental and Natura 2000 permit, which is progressing through the statutory appeals process. The granting of these permits reflects the rigour of Talga’s sustainability and community work conducted over multiple years. Annual Report 2023Talga Group 62 63 Responsible value chain Reducing waste through circular processing and recycling A responsible value chain is key to Talga’s goal of enabling the Talga envisions a fully circular operation where our waste is world’s most sustainable batteries and consumer products innovated into value. With a focus on solid and liquid waste, through graphitic materials. Our project is well advanced we are investigating the creation of a strategy for new towards this goal and we strive for continual improvement. research and development programs using our operational Life Cycle Assessment As a responsible value chain actor, we commissioned leading sustainability consultancy Minviro to conduct a new peer- reviewed Life Cycle Assessment (LCA) for Talnode®-C. The assessment, disclosed subsequent to the Reporting Period, clearly demonstrates 92% less global warming potential than existing synthetic EV anode material imported into Europe. The LCA estimates production of 1kg of Talnode®-C produces 1.7kg CO2-eq. This is equivalent to a potential reduction of 1.6 tonne of CO2-eq per produced EV2. The LCA is a cradle-to-gate study, meaning the product was assessed from mining (cradle) up to Talnode®-C delivery (gate). In accordance with best practice and to waste streams, eventually creating and enabling new products. Key areas of focus currently include mine tailings and residue generated from the effluent treatment. Funded as part of Innovate UK and Automotive Propulsion Centre’s ATF Fund, Talga carried out a feasibility study to assess recovery of graphite from spent graphite in lithium- ion batteries and scrap graphite from Gigafactories. As part of the study, we sourced recycled graphite concentrate from various suppliers with the aim to repurpose them back as graphite anode and graphene additives. The overall study showcased positive technical commercial, social, and economic benefits recommending further work in this area. ensure continued compatibility with European regulations, Peer-reviewed Life Cycle Assessment for the report considers Scope 1, 2 and 3 emissions. Emissions Talnode®-C demonstrated 92% less global warming potential than existing EV anodes imported into Europe directly related to Talnode®-C production processes (Scope 1) comprise just 0.7 kg CO2-eq, with the remainder (Scope 2-3) relating predominantly to external suppliers. These Scope 2-3 emissions are based on generic datasets, meaning once Talga enters commercial production, we can further optimise our impact through strategic sustainable procurement processes. We continue to assess opportunities to further reduce Talnode®-C’s already low emissions profile. Investigations include mining fleet electrification and extraction options; electrified concentrate transport and optimisation of production waste management; and recycling. The LCA is an update on a previous assessment by Hitachi Energy (formerly Hitachi ABB Power Grids). The updated LCA is based on the Project DFS and incorporates more recent data from engineering and the advanced stages of development of the Vittangi Anode Project. The LCA was conducted according to ISO 14040 and ISO 14044 standards and underwent critical peer review to test comparative assertions. 2 Assumed battery pack size of 65kWh per EV. Note 1kWh = 1.2kg anode, Benchmark Mineral Intelligence report. Talga GroupAnnual Report 2023 64 65 reasonable timeframes for resolution of any issues raised. ISO Certification The mechanism can be used for positive or negative feedback or complaints. The Grievance Mechanism can be For Talga’s existing operations across Europe, we are accessed at talgagroup.com. Indigenous engagement implementing a review and update of our management systems with a view to achieve ISO certifications during H1 2024. Management systems being covered by this program include: Talga aims to establish and sustain positive, open and ongoing communication with Indigenous peoples, including — ISO 9001 quality management Sami reindeer herding cooperatives and other stakeholders — ISO 45001 health and safety management by demonstrating respect for individuals’ values, views and rights. This engagement seeks to establish beneficial — ISO 14001 environmental management sharing arrangements that facilitate socioeconomic — ISO 27001 information security management advancement. Talga continues to actively share information and extend invitations of engagement with local Sami villages to discuss Talga’s ongoing exploration and project development activities. During October 2022, Talga participated in an education session about Sami rights, arranged by the Svemin work group AG Ren. The session was presented by two members of Sami reindeer herding cooperatives. In addition, we are undertaking a gap analysis to demonstrate alignment with ISO 26000, a guidance for social responsibility. People and community Talga plans and develops its operations with a view to minimise negative impacts during operations and to leave the environmental and social condition of where we operate in a better condition than when we arrived. We are committed to both the development of our host Throughout the year we have had continuous meetings and communities and the minimisation of the adverse impacts engagements with individual local stakeholders for different on our host communities, as well as the human rights purposes, including citizens, landowners, local entrepreneurs of employees and communities, including Indigenous and other groups both in Vittangi and Luleå. peoples, affected by our activities. We have formalised this commitment in our Social Performance Policy, which states our goal to use our business activities to positively contribute to the social and economic development of our host communities, develop and promote respectful and productive relationships with stakeholders, and capitalise on commercial opportunities to benefit people. We have hosted open days at our Niska South trial mine and in Luleå, answering visitors’ questions as well as informing them our project and how it will benefit the region and community. Talga also participated in the Kiruna Fair for the second year running, speaking to many visitors about our operations and future plans. We proudly continued our annual sponsorship of Vittangi Sports Club and also Talga plans and develops its operations with a view to established a new three-year sponsorship of the Kiruna minimise negative impacts during operations and to leave Budo Club. the environmental and social condition of where we operate in a better condition than when we arrived. Protection and enhancement of community is key to this. For the second year running, we commissioned a community survey with Vittangi residents near our mine site. These surveys assist Talga to understand trends in community We maintain ongoing engagement within the communities attitudes towards the Vittangi Anode Project over time. in which we operate and communicate our activities and aspirations in a transparent and consistent manner via a range of channels, including direct dialogue with neighbouring community members, newsletters, advertisements and participation in local events. Local community engagement Talga is committed to providing opportunities for the communities we operate within, through both employment directly with Talga and other business opportunities. Talga recruits and sources materials and labour locally whenever feasible. This was demonstrated during the 2020-2022 Niska South trial mine implementation near Vittangi and the EVA Plant construction in Luleå. Community attitudes to the project have remained consistent, with 48% of respondents stating that the project would be beneficial to the local community, a slight increase on the previous study. 29% stated that the project will be negative to the community while 19% were neutral. 4% were unsure, a decrease from the previous result of 8%. Community concerns included the need for preservation of the area’s natural surface water bodies and the increased likelihood of general pollution emanating from mining activities. In line with our stakeholder engagement approach, we continue to have in place a Grievance Mechanism to provide an appropriate channel for community concerns to be voiced and resolved. The Grievance Mechanism provides a range of contact points for all Talga stakeholders and Talga GroupAnnual Report 2023 66 67 Long-term value Talga is dedicated to attracting, nurturing, and retaining high-quality individuals aligned with our values and goals Our team Talga maintains a system of employment and recruitment which meets and exceeds the International Labour Talga is dedicated to attracting, nurturing, and retaining Organisation’s Fundamental Conventions, which address high-quality individuals aligned with our values and goals. issues of forced labour, freedom of associations, equal Emphasising continuous development, learning, and an remuneration, discrimination, child labour and occupational entrepreneurial mindset are pivotal to Talga’s success. safety and health. We are growing and we are currently 61 employees located Talga prioritises health and safety as foundational in four different countries, representing over 17 nationalities. principles across our operations. We promote a healthy In June 2023, Talga Group had a gender split of 43 percent work-life balance and implement well-being benefits, as women and 57 percent men. well as maintain agreements with occupational health care We are actively working towards equality in all areas of our providers to safeguard our employees’ welfare. company. Talga, together with several of Sweden’s industrial Diversity and inclusion are core tenets, recognised for companies, signed a declaration of intent for equal industry enhancing performance and achieving goals through a in northern Sweden. This is to promote sustainable social varied talent pool. Talga promotes a culture of coaching, development for both women and men in equal ways. development, and a harassment-free workplace, treating all To support the growth of qualified labour in northern Sweden, Talga has undertaken the task of co-arranging higher vocational training with KYH in Gällivare for Process Technicians. The training lasts 1.5 years and qualifies people to work with digital and smart automation and maintenance systems for monitoring, regulation, reliability and troubleshooting. Talga will be part of the management team for Education. stakeholders equitably. 61 employees Located in four different countries, representing Through our Work Environment Policy, which encompasses over 17 nationalities and expands upon workplace health and safety, we are committed to providing our employees with a work environment where they thrive and develop, and no one suffers from ill health or is harmed because of their work. Governance Talga’s financial management, governance and controls are properly accounted for and audited in accordance with IFRS Talga is a listed company and committed to implementing standards and to the legislative requirements of operating the highest standards of corporate governance aligned with nations. Talga has begun the process of working towards recommendations of the Australian Securities Exchange adoption of the recently released IFRS S1 and S2 standards (ASX). We have an established corporate governance (also known as the ISSB standards) for sustainability across framework including corporate governance policies, the organisation, while simultaneously demonstrating procedures, and charters with reference to the fourth edition alignment with ISO 26000. of the ASX Corporate Governance Council’s Principles and Recommendations (ASX Principles). Talga is committed to creating and maintaining an open working environment in which employees, Directors, The Board of Directors of Talga Group Ltd is responsible contractors, suppliers, partners and consultants are able for corporate governance of the Company. The Board’s to raise concerns regarding actual or suspected unethical, governing principle in meeting this responsibility is to act unlawful or undesirable conduct. Our Whistleblower Policy honestly, conscientiously, and justly, in accordance with the sets out the process to be followed if our people suspect law, in the interests of shareholders, employees and other wrongdoing, unethical conduct, or dangers at work which stakeholders. We appreciate that risk management, compliance and control are key elements of good corporate governance. The Board of Directors of Talga Group Ltd is responsible for reviewing and approving our risk management strategy, Risk Management Policy, and key risks. Our risk management is may affect others. The Whistleblower Policy demonstrates our commitment to a fair workplace and aims to protect individuals who, in good faith, report misconduct which they reasonably believe to be corrupt, illegal or unethical on a confidential basis, without fear of reprisal, dismissal or discriminatory treatment. consistent with ISO 31000 Risk Management. Talga’s corporate governance policies and procedures are available at talgagroup.com Talga operates in compliance with the law and regulations of the countries and jurisdictions that we operate in. Our Anti- bribery and Corruption Policy describes the practices and standards required of Talga employees and board members to maintain business integrity. Talga transparently discloses progress and developments to stakeholders. Non-financial reporting is disclosed annually within the Sustainability and People Report. Talga GroupAnnual Report 2023 68 69 Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position for the year ended 30 June 2023 for the year ended 30 June 2023 Revenues from ordinary activities Other Income Expenses Notes 2 2 2023 $ 2022 $ 279,572 16,420 Current Assets 1,714,328 648,160 Cash and cash equivalents Trade and other receivables Administration expenses (5,140,842) (3,212,573) Prepayments Compliance and regulatory expenses (4,796,270) (1,670,169) Total Current Assets Depreciation expense (3,753,750) (972,187) Non-Current Assets Employee benefits expenses and Directors Fees (3,917,088) (3,691,963) Other receivables Notes 2023 $ 2022 $ 4 5 7 6 38,226,375 13,012,565 2,516,243 1,517,075 687,970 858,892 41,430,588 15,388,532 568,608 444,077 Exploration and evaluation expenditure (756,927) (3,259,532) Property, plant and equipment 8 (a, b) 20,714,979 15,177,583 Exploitation costs Sweden (6,319,067) (7,911,689) Right of use assets 8 (c) 2,303,006 1,743,181 Trial Mine and anode production (11,805,665) (1,823,592) Exploration and evaluation acquisition costs 9 132,022 397,970 Operations – Test Facility, Research & Product Development (4,334,680) (5,083,598) Total Non-Current Assets FX realised and unrealised gain / (loss) (451,476) (2,736,487) Total Assets Share based payments 26 (4,074,202) (7,102,110) Current Liabilities 23,718,615 17,762,811 65,149,203 33,151,343 (Loss) before income tax expense (43,356,067) (36,799,320) Lease liability 8 (c) 801,411 574,417 Income tax expense 3 - - Trade and other payables Net (loss) attributable to members of the parent entity (43,356,067) (36,799,320) Provisions Other comprehensive income / (loss) Items that will not be reclassified to profit or loss Total Current Liabilities Non-Current Liabilities 10 11 4,818,877 4,024,562 978,791 783,731 6,599,079 5,382,710 Changes in the fair value of financial assets at fair value 13 - (53,657) Lease liability 8 (c) 1,565,762 1,121,055 through OCI Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations 555,678 982,230 Total other comprehensive (loss) / income for the year 555,678 928,573 Total comprehensive (loss) for the year (42,800,388) (35,870,747) Total comprehensive (loss) attributable to members of the parent entity (42,800,388) (35,870,747) Basic loss per share (cents per share) Diluted loss per share (cents per share) 16 16 (12.00) (12.00) (12.10) (12.10) Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity 1,565,762 1,121,055 8,164,841 6,503,765 56,984,362 26,647,577 12 13 14 203,434,497 133,472,526 19,879,082 16,148,202 (166,329,217) (122,973,151) 56,984,362 26,647,577 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Talga GroupAnnual Report 2023 70 71 Consolidated statement of changes in equity Consolidated statement of cash flows for the year ended 30 June 2023 for the year ended 30 June 2023 At 1 July 2021 130,184,218 (86,173,831) 11,086,687 55,097,074 Cash flows from operating activities Issued Capital $ Accumulated Losses Reserves $ $ Total $ Notes 2023 $ 2022 $ Comprehensive income Loss after income tax for the year Fair value adjustment in relation to financial assets at FVTOCI Exchange differences on translation of foreign operations - - - (36,799,320) - (36,799,320) Payments for exploration, evaluation and exploitation (22,633,676) (16,566,701) Receipts from Customers 279,110 82,176 - - 982,230 982,230 (53,657) (53,657) Payments to suppliers, contractors and employees (9,596,155) (8,629,657) German and UK Operations including R&D (5,560,794) (3,787,641) Total comprehensive income (loss) - (36,799,320) 928,573 (35,870,747) for the year Transactions with owners in their capacity as owners Issue of share capital Capital raising costs 336,308 - Share based compensation 2,952,000 - - - - 336,308 (17,168) (17,168) 4,150,110 7,102,110 Interest received Interest paid on leases Other income – grants 583,700 45,381 (90,681) (40,325) 771,234 2,043,083 Net cash flows (used in) operating activities 15 (36,247,262) (26,853,684) Cash flows from investing activities Purchase of plant and equipment (6,394,582) (12,428,175) Payment other – Security Bonds payments (20,900) (545,327) Proceeds from sale of financial asset - 566,343 At 30 June 2022 133,472,526 (122,973,151) 16,148,202 26,647,577 Net cash (used in) investing activities (6,415,482) (12,407,159) At 1 July 2022 133,472,526 (122,973,151) 16,148,202 26,647,577 Proceeds from issue of securities Cash flows from financing activities Comprehensive income Loss after income tax for the year Fair value adjustment in relation to financial assets at FVTOCI Exchange differences on translation of foreign operations - - - (43,356,066) - - - - (43,356,066) Lease payments - Net cash flows (used in) / from financing activities Payment for costs of issue of securities 72,109,679 - (3,131,249) (20,018) (1,122,737) (469,284) 67,855,693 (489,302) 555,678 555,678 Net (decrease) / increase in cash and cash equivalents 25,192,949 (39,750,145) Cash and cash equivalents at the beginning of the financial year 13,012,565 52,497,518 Total comprehensive income (loss) - (43,356,066) 555,678 (42,800,388) for the year Transactions with owners in their capacity as owners Issue of share capital Capital raising costs 72,288,201 (3,225,230) Share based compensation 899,000 - - - - - 72,288,201 (3,225,230) 3,175,202 4,074,202 At 30 June 2023 203,434,497 (166,329,217) 19,879,082 56,984,362 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Net foreign exchange differences 20,861 265,192 Cash and cash equivalents at the end of the financial year 4 38,226,375 13,012,565 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Talga GroupAnnual Report 2023 72 73 Notes to the consolidated financial statements for the year ended 30 June 2023 1. Statement of significant accounting policies The financial report is a general purpose financial report the energy transition and mining sectors. Talga’s strategic that has been prepared in accordance with Australian selection of financiers is a key step in delivering the Accounting Standards including Australian Accounting Project financing and follows an extensive process that Interpretations, other authoritative pronouncements included comprehensive independent market, technical, of the Australian Accounting Standards Board and the financial, and environmental due diligence reports. The Corporations Act 2001. The financial report of the Group independent due diligence investigation was undertaken complies with all International Financial Reporting Standards by a number of leading consultancy groups acting for the (IFRS), as issued by the International Accounting Standards financiers. Finalisation of Project debt facilities with the selected banking consortium remains subject to finalisation of approvals, completion of remaining due diligence and execution of definitive debt facility documentation, which are expected to include customary project financing terms and conditions. Drawdowns under the facility would be subject to customary conditions precedent. Customer Board, in their entirety. The financial report covers the parent Talga Group Ltd and Controlled Entities (the “Group”). Talga Group Ltd is a public company, incorporated and domiciled in Australia. The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. Going Concern The Directors have prepared the financial statements on a going concern basis, which contemplates continuity of a. Business combinations is accounted for within equity. Contingent consideration classified as an asset or a liability is re-measured each Business combinations occur where an acquirer obtains Reporting Period to fair value through the statement of control over one or more businesses and results in the comprehensive income unless the change in value can be consolidation of its assets and liabilities. identified as existing at acquisition date. A business combination is accounted for by applying All transaction costs incurred in relation to the business the acquisition method, unless it is a combination combination are expensed to the profit or loss. involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifiable assets acquired, and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. b. Exploration, evaluation and development expenditure Exploration and evaluation costs are written off in the year they are incurred. Costs of acquisition are capitalised to areas of interest and carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the The acquisition may result in the recognition of goodwill existence of economically recoverable reserves. negotiations to allocate supply and underpin debt financing or a gain from a bargain purchase. The method adopted agreements are progressing. As at the date of this report, the Directors are satisfied that there is a reasonable basis that the Group will be able to achieve the matters set out above, including the securing for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree. of funding for the Vittangi Anode Project, and thus it is The acquisition date fair value of the consideration When an area of interest is abandoned, or the Directors decide that it is not commercial, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated acquisition costs written off appropriate to prepare the financial statements on a going transferred for a business combination plus the acquisition to the extent that they will not be recoverable in the concern basis. normal business activities and the realisation of assets and If, however the Group is unable to achieve these matters, extinguishment of liabilities in the ordinary course of business. then there is a material uncertainty that may cast significant The Group has cash and cash equivalents of $38.2 million and net current assets of $34.8 million as at 30 June 2023. The Group made a net loss of $42.8 million and has incurred net operating and investing cash outflows of $42.8 million for the year ended 30 June 2023. The Directors acknowledge that further funding in the form of debt and/or equity raisings will be required in order to progress the Group’s planned objectives, including the development of the Vittangi Anode Project. Subsequent to 30 June 2023, the Group (ASX:TLG 12 September 2023) has completed selection of the banking consortium to provide all of the debt funding for the Vittangi Anode Project. In addition to the European Investment Bank (ASX:TLG 20 June 2023), the consortium comprises multiple government-owned export credit agencies and European commercial banks with strong credentials in doubt on whether the Group will continue as a going concern and therefore whether it will realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts, nor the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going concern. The following is a summary of the material accounting policies adopted by the Group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. date fair value of any previously held equity interest shall future. Where projects have advanced to the stage that form the cost of the investment in the separate financial Directors have made a decision to mine, they are classified statements. Consideration may comprise the sum of the as development properties. When further development assets transferred by the acquirer, liabilities incurred by the expenditure is incurred in respect of a development acquirer to the former owners of the acquiree and the equity property, such expenditure is carried forward as part of the interests issued by the acquirer. Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not re-measured and its subsequent settlement cost of that development property only when substantial future economic benefits are established. Otherwise, such expenditure is classified as part of the cost of production or written off where production has not commenced. c. Plant and equipment Plant and equipment are initially recognised at acquisition cost (including any costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by the Group’s management) and subsequently measured using the cost model (cost less subsequent depreciation and impairment losses). Talga GroupAnnual Report 2023 74 75 Depreciation is calculated on either the straight-line basis or For the purpose of subsequent measurement, financial For debt instruments at fair value through OCI, interest e. Cash and cash equivalents diminishing value basis over their useful lives to the Group assets other than those designated and effective as hedging income, foreign exchange revaluation and impairment losses commencing from the time the asset is held ready for use. instruments are classified into the following categories upon or reversals are recognised in the statement of profit or Cash and cash equivalents includes cash on hand, deposits The following useful lives are applied: initial recognition: Operating Equipment: 3–20 years — amortised cost; Office equipment: 1–15 years — fair value through other comprehensive income Vehicles: Buildings: 5–8 years 10–40 years (FVOCI); and — fair value through profit or loss (FVPL). loss and computed in the same manner as for financial held at call with banks, other short-term highly liquid assets measured at amortised cost. The remaining fair value investments with original maturities of three months or changes are recognised in OCI. less, and bank overdrafts. Bank overdrafts are shown within Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the financial liabilities in current liabilities on the Statement of Financial Position. definition of equity under AASB 132 Financial Instruments: f. Trade and other receivables Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in Classifications are determined by both: Presentation and are not held for trading. — the contractual cash flow characteristics of the financial assets; and Financial assets at fair value through profit or loss (FVPL) Financial assets at fair value through profit or loss include — the Group’s business model for managing the financial assets held for trading, financial assets designated profit or loss within other income or other expenses. financial asset. d. Financial instruments Recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial instruments (except for trade receivables) are measured initially at fair value adjusted by transaction costs, except for those carried at ‘fair value through profit or loss’, in which case transaction costs are expensed to profit or loss. Where available, quoted prices in an active market are used to determine the fair value. In other circumstances, valuation techniques are adopted. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet with the following conditions and are not designated as FVPL; — they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and — the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Trade receivables are initially measured at the transaction Group’s cash and cash equivalents, trade and most other price if the receivables do not contain a significant financing receivables fall into this category of financial instruments. component in accordance with AASB 15. Financial assets are derecognised when the contractual Financial assets at fair value through other rights to the cash flows from the financial asset expire, comprehensive income or when the financial asset and all substantial risks and The Group measures debt instruments at fair value through rewards are transferred. A financial liability is derecognised OCI if both of the following conditions are met: when it is extinguished, discharged, cancelled or expired. upon initial recognition at fair value through profit or loss or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial liabilities Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Trade and other receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30–90 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade and other receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 1(d). g. Revenue Financial liabilities are initially measured at fair value, and, Revenue from the sale of goods is recognised upon where applicable, adjusted for transaction costs unless the the delivery of goods to customers. Interest revenue is Group designated a financial liability at fair value through recognised on a proportional basis taking into account the profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses interest rates applicable to the financial assets. Revenue from the rendering of a service is recognised upon the delivery of the service to the customers. All revenue is stated net of the amount of goods and services tax (GST). recognised in profit or loss. All interest-related charges and, h. Grants if applicable, gains and losses arising on changes in fair value are recognised in profit or loss. Impairment Government and other grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs it is compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis. Classification and measurement Financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). — the contractual terms of the financial asset give rise on The Group assesses on a forward-looking basis the specified dates to cash flows that are solely payments expected credit loss associated with its debt instruments of principal and interest on the principal amount carried at amortised cost and FVOCI. The impairment outstanding; and — the financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling the financial asset. methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Talga GroupAnnual Report 2023 76 77 i. Impairment of assets j. Goods and Services Tax (GST) and At each reporting date, the Group reviews the carrying Value Added Tax (VAT) The amount of benefits brought to account or which may be realised in the future is based on the assumption that n. Issued capital no adverse change will occur in income taxation legislation Issued and paid up capital is recognised at the fair value amounts of its tangible and intangible assets to determine Revenues, expenses, and assets are recognised net of the and the anticipation that the Group will derive sufficient of the consideration received by the Company. Any whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are amount of GST/VAT, except where the amount of GST/VAT incurred is not recoverable from the Australian Tax Office (ATO) or relevant Tax Authority. In these circumstances the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables independent from the other assets, the Group estimates the and payables in the statement of financial position are recoverable amount of the cash-generating unit to which shown inclusive of GST/VAT. the asset belongs. Goodwill, intangible assets with indefinite useful lives and intangible assets not yet ready for use are tested for impairment annually regardless of whether there are impairment indicators or not. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future The net amount of GST/VAT recoverable from, or payable to, the ATO or other Tax Authority is included as a current asset or liability in the statement of financial position. Cash flows are included in the cash flow statement on a gross basis. The GST/VAT components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO or relevant Tax Authority are classified as operating cash flows. cash flows have not been adjusted. k. Taxation If the recoverable amount of an asset (or cash-generated unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in the income statement immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation increase. The Group adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit/loss from ordinary activities adjusted for any non-assessable or disallowed items. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised, or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. future assessable income to enable the benefit to be transaction costs arising on the issue of ordinary shares realised and comply with the conditions of deductibility are recognised directly in equity as a reduction of the share imposed by the law. proceeds received. l. Trade and other payables o. Earnings per share Trade payables and other payables are carried at amortised Basic earnings per share is calculated as net earnings costs and represent liabilities for goods and services attributable to members, adjusted to exclude costs of provided to the Group prior to the end of the financial year servicing equity (other than dividends) and preference that are unpaid and arise when the Group becomes obliged share dividends, divided by the weighted average number of to make future payments in respect of the purchase of ordinary shares, adjusted for a bonus element. these goods and services. m. Share-based payments The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting period. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments used, if it is determined the fair value of the goods and services cannot be reliably measured and are recorded at the date the goods or services are received. Fair value is measured by use of a Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, Diluted EPS is calculated as net earnings attributable to members, adjusted for costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that would have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. p. Critical accounting estimates and judgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical for the effects of non-transferability, exercise restrictions knowledge and best available current information. Estimates and behavioural considerations. The fair value determined at the grant date of the equity- settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. of shares that will eventually vest. Key estimates – impairment For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date. The value of shares issued to employees financed by way of a non-recourse loan under the employee Share Plan is The Group assesses impairment at the end of each Reporting Period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. If impairment triggers are identified, then recoverable amounts of relevant assets are reassessed using value- in-use calculations which incorporate various recognised with a corresponding increase in equity when the key assumptions. Company receives funds from either the employees repaying the loan or upon the loan termination. All shares issued under the plan with non-recourse loans are considered, for accounting purposes, to be options. Key judgement – exploration and evaluation costs Acquisition costs are accumulated in respect of each identifiable area of interest where the right of tenure is Talga GroupAnnual Report 2023 78 79 current and are expected to be recouped or where an — AASB 2020-3 Amendments to Australian Accounting area that has not at balance sheet date reached a stage Standards – Annual Improvements 2018-2020 and which permits a reasonable assessment of the existence or Other Amendments r. Foreign Currency iii. Foreign operations — AASB 2021-7 Amendments to Australian Accounting The functional currency of each of the Group’s entities Standards – Effective Date of Amendments to AASB is measured using the currency of the primary economic 10 and AASB 128 and Editorial Corrections (insofar as environment in which that entity operates. The consolidated the Standard relates to editorial corrections that are financial statements are presented in Australian dollars effective for the current year) which is the parent entity’s functional and presentation i. Functional and presentation currency For the purposes of presenting consolidated financial statements, the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions. otherwise of economically recoverable reserves, and active and significant operations in, or relating to, the area of interest are continuing. Key judgment – environmental issues Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the Directors’ understanding thereof. At the current stage of the Group’s development and its current environmental impact, the Directors believe such treatment is reasonable and appropriate. As at 30 June New and amended accounting policies not yet adopted by the group AASB 2020-1: Amendments to Australian Accounting Standards – Classification of Liabilities as Current or 2023, the Group had no environmental rehabilitation issues Non-current to provide for. Share based payments The Group measures the cost of equity-settled and cash- settled transactions by reference to the fair value of the goods or services received in exchange if it can be reliably measured. If the fair value of the goods or services cannot The amendment amends AASB 101 to clarify whether a liability should be presented as current or non-current. The Group plans on adopting the amendment for the Reporting Period ending 30 June 2024. The amendment is not expected to have a material impact on the financial statements once adopted. be reliably measured, the costs is measured by reference to the fair value of the equity instruments at the date at which AASB 2021-2: Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and they are granted. The fair value is determined by using the Definition of Accounting Estimates Black-Scholes model and the assumptions and carrying amount at the reporting date, if any, is disclosed in note 26. Deferred tax The potential deferred tax asset arising from the tax losses and temporary differences have not been recognised as an asset because recovery of the tax losses is not yet The amendment amends AASB 7, AASB 101, AASB 108, AASB 134 and AASB Practice Statement 2. These amendments arise from the issuance by the IASB of the following International Financial Reporting Standards: Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) and Definition of Accounting Estimates (Amendments to IAS 8). considered probable (refer note 3). The Group plans on adopting the amendment for the q. Application of new and revised accounting standards New and amended accounting policies adopted by the group The Group has adopted all the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for an accounting period that began on or after 1 July 2022. New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group include: Reporting Period ending 30 June 2024. The impact of the initial application is not yet known. AASB 2021-5: Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction The amendment amends the initial recognition exemption in AASB 112: Income Taxes such that it is not applicable to leases and decommissioning obligations – transactions for which companies recognise both an asset and liability and that give rise to equal taxable and deductible temporary differences. The Group plans on adopting the amendment for the Reporting Period ending 30 June 2024. The impact of the initial application is not yet known. currency. The functional currency of the Consolidated Foreign currency differences are recognised in other Entity’s subsidiaries Talga Mining Pty Ltd is Australian comprehensive income and presented in the foreign dollars; Talga AB and Talga Battery Metals AB is the Swedish currency translation reserve (translation reserve) in equity. Krona (SEK); Talga Advanced Materials GmbH is the Euro However, if the foreign operation is a non-wholly owned (EUR); and Talga Technologies Limited is Great British subsidiary, then the relevant proportion of the translation Pounds (GBP) and Talga Anode UK Limited are in GBP. difference is allocated to the non-controlling interests. ii. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is exchange rate at the end of the year. reclassified to profit or loss. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such items are considered to form part of the net investment in the foreign operation and are recognised in other comprehensive income and presented in the Foreign currency differences arising on retranslation are generally recognised in profit or loss. However, foreign translation reserve in equity. currency differences arising from the retranslation of the s. Principles of Consolidation following items are recognised in other comprehensive income: The consolidated financial statements incorporate all of the — Investments at fair value through other comprehensive assets, liabilities and results of the parent (Talga Group Ltd) income (except on impairment in which case foreign and all of its subsidiaries. Subsidiaries are entities the parent currency differences that have been recognised in other controls. The parent controls an entity when it is exposed to, comprehensive income are reclassified to profit or loss); or has rights to, variable returns from its involvement with — A final liability designated as a hedge of the net investment in a foreign operation to the extent that the the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided hedge is effective; or in note 25. — Qualifying cash flow hedges to the extent the hedge is effective. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. Talga GroupAnnual Report 2023 80 81 The consolidation of a subsidiary is discontinued from payments made to transfer the liability, after taking into would generally use when pricing the asset or liability are u. Leases – The Group as Lessee the date that control ceases. Intercompany transactions, account transaction costs and transport costs). considered observable, whereas inputs for which market balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly, or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. t. Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The Fair value is the price the Group would receive to sell valuation techniques selected by the Group are consistent an asset or would have to pay to transfer a liability in an with one or more of the following valuation approaches: orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest — Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. equivalent observable market pricing information is used to — Income approach: valuation techniques that convert determine fair value. Adjustments to market values may be estimated future cash flows or income and expenses made having regard to the characteristics of the specific into a single discounted present value. asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the Reporting Period (i.e. the market that maximises the receipts from the sale of the asset or minimises the — Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers data is not available and therefore are developed using the At inception of a contract the Group assesses if the contract best information available about such assumptions are contains or is a lease. If there is a lease present, a right-of- considered unobservable. use asset and a corresponding liability are recognised by the Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1: Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (i.e. leases with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially, the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses incremental borrowing rate. Lease payments included in the measurement of the lease measurement date. liability are as follows; Level 2: Measurements based on inputs other — fixed lease payments less any lease incentives; than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Measurements based on unobservable inputs for the asset or liability. — variable lease payments that depend on index or rate, initially measured using the index or rate at the commencement date; — the amount expected to be payable by the lessee under residual value guarantees; The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are — the exercise price of purchase options if the lessee is reasonably certain to exercise the options; — lease payments under extension options, if the lessee is reasonably certain to exercise the options; and observable, the asset or liability is included in Level 2. If — payments of penalties for terminating the lease, if the one or more significant inputs are not based on observable lease term reflects the exercise of options to terminate market data, the asset or liability is included in Level 3. the lease. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: — if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date and any initial direct costs. The subsequent measurement of the right- of-use assets is at cost less accumulated depreciation and — if significant inputs that were previously unobservable impairment losses. (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. Talga GroupAnnual Report 2023 82 83 v. Provisions Provision for employee entitlements Provision is made for employee entitlements accumulated 3. Income taxes Provisions are recognised when the Group has a present as a result of employees rendering services up to the end of obligation (legal or constructive) as a result of a past event, it the Reporting Period. These benefits include wages, salaries, is probable that an outflow of resources embodying economic annual leave and long service leave. Liabilities in respect of benefits will be required to settle the obligation and a reliable employees’ services rendered that are not expected to be estimate can be made of the amount of the obligation. wholly settled within one year after the end of the period in Prima facie income tax benefit at 25% (2022: 25%) on loss from ordinary activities is reconciled to the income tax provided in the financial statements* which the employees render the related services recognised as long-term employee benefits. These liabilities are measured at the present value of the estimated future cash outflow to the employees using the projected unit credit method. Liabilities expected to be wholly settled within one year after the end of the period in which the employees render the related services are classified as short-term benefits and are measured at the amount due to be paid. a. Income tax Loss before income tax Tax effect of Expenses not allowed 2023 $ 2022 $ (14,852,194) (13,458,252) 1,388,544 1,777,279 2. Revenue and other income Section 40-880 deduction (write-off for certain capital costs) (824,628) (4,292) Future income tax benefit not brought to account 3,149,132 1,591,576 Income tax attributable to operating losses - - Product Sales Interest revenue Research and development refund Grants 2023 $ 279,572 584,068 2022 $ 16,420 45,381 104,791 101,716 1,025,469 501,063 1,714,328 648,160 b. Deferred tax assets and (liabilities) Australian tax losses Provisions Section 40-880 deduction Other deferred amounts Prepayments 2023 $ 2022 $ 10,363,108 8,048,437 184,062 155,832 1,105,686 687,382 289,637 205,173 (74,310) (26,197) Unrecognised deferred tax assets relating to the above 11,868,183 9,070,627 temporary differences * The tax calculations for the year ended 2023 are based on the tax jurisdiction of the parent entity tax consolidated group (Talga Group Ltd and Talga Mining Pty Ltd) only. The estimated foreign (German/Swedish/UK) cumulative The benefits will only be obtained if: tax losses are approximately $84.8 million and the deferred tax benefit from the cumulative foreign tax losses not recognised is approximately $16.6 million (based on a German/Swedish/UK tax rate of 15%/20.6%/19%). — The Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deduction for the losses to be realised. — The Group continues to comply with the conditions in deductibility imposed by the Law; and — No change in tax legislation adversely affects the Group in realising the benefits from the deductions or the losses. Talga GroupAnnual Report 2023 84 85 4. Cash and cash equivalents Cash at bank 5. Trade and other receivables Current Trade debtors and grant receivables GST / VAT receivable Total trade and other receivables 6. Other receivables Non current Security term deposit Environmental bond Total security deposits 2023 $ 2022 $ 38,226,375 13,012,565 2023 $ 2022 $ 1,314,191 238,975 1,202,052 1,278,099 2,516,243 1,517,074 2023 $ 2022 $ 290,059 160,677 278,549 283,400 568,608 444,077 Security term deposit relates to a term deposit taken out as security for rent of the Perth head office and German pilot plant facility. The Environmental Bond (SEK 2,000,000) relates to a term deposit taken out as security for the Vittangi Trial Mine. Talga GroupAnnual Report 2023 86 87 7. Prepayments Balance at the start of the financial year 858,892 37,570 Less accumulated depreciation Movement for the year (170,922) 821,322 Balance at the end of the financial year Balance at the end of the financial year 687,970 858,892 Right of use assets at cost 2023 $ 2022 $ c. Right of use assets Right of use assets at cost 2023 $ 2022 $ 3,752,869 2,434,877 (1,449,863) (691,696) 2,303,006 1,743,181 8. Property, plant and equipment a. Property, plant and equipment Property, plant and equipment at cost Less: accumulated depreciation Total property, plant and equipment Balance at the beginning of the financial year Additions 2023 $ 2022 $ 23,424,868 16,798,850 (2,709,888) (1,621,267) 20,714,980 15,177,583 2,466,303 3,408,450 6,572,782 679,120 Balance at the beginning of the financial year 2,434,877 813,903 Additions Balance at the end of the financial year Right of use assets accumulated depreciation 1,317,992 1,620,974 3,752,869 2,434,877 Balance at the beginning of the financial year (691,696) (417,155) Charge for the year Balance at the end of the period (758,167) (274,541) (1,449,863) (691,696) Balance of right of use assets at the end of the period 2,303,006 1,743,181 2023 $ 2022 $ 801,411 574,417 1,565,762 1,121,055 Liabilities at the end of period in the relation to right of use assets are: Transferred from construction in progress 13,090,986 - Current Lease Liability Adjustment for written down value Depreciation expense - (1,122,874) Non-Current Lease Liability (1,922,881) (618,927) Effect of foreign currency exchange differences (787,008) 120,534 Balance at the end of the financial year 19,420,182 2,466,303 b. Construction in progress Balance at the beginning of the financial year 12,711,280 962,225 The lease payments totalling $1,122,737 (2022: $509,609) during the year are recorded in the statement of cashflow. At initial recognition, the lease liability was measured as the present value of minimum lease payments using the Group’s incremental borrowing rate of 4% - 6.9%. The incremental borrowing rates was based on the unsecured interest rate that would apply if finance was sought for an amount and time period equivalent to the lease requirements of the Group. Additions Transferred to plant and equipment Effect of foreign currency exchange differences Balance at the end of the financial year 1,623,425 11,749,055 Each lease payment is allocated between the liability and interest expense. The interest (13,090,986) 51,078 - - 1,294,797 12,711,280 20,714,979 15,177,583 expense of $90,681 (2022: $40,325) was included in administration expenses in the consolidated statement of profit or loss and other comprehensive income. Lease payments during the year were $1,122,737 (2022: $509,609) excluding interest. Talga GroupAnnual Report 2023 88 89 9. Exploration and evaluation expenditure Balance at the beginning of the financial year 397,970 265,800 Foreign currency exchange movement in assets (265,948) 132,170 Balance at the end of the financial year 132,022 397,970 2023 $ 2022 $ 10. Trade and other payables Current payables Trade creditors Accruals Superannuation / PAYG payable Total trade and other payables Trade liabilities are non-interest bearing and normally settled on 30-day terms. 11. Provisions – current liabilities Provision for annual leave Provision for long service leave 2023 $ 2022 $ 2,040,661 2,367,646 2,430,683 1,353,391 347,533 303,524 4,818,877 4,024,561 2023 $ 2022 $ 751,855 597,636 226,936 186,095 978,791 783,731 Talga GroupAnnual Report 2023 90 91 12. Issued capital Issued and fully paid Issued and fully paid Issued and fully paid 2023 $ 2022 $ 203,434,497 133,472,526 203,434,497 133,472,526 Fully Paid Ordinary Shares 360,754,172 203,434,497 304,974,519 133,472,526 2023 Number 2023 $ 2022 Number 2022 $ Capital Management Management controls the capital of the Group in order to ensure that the Group can fund its operations and continue as a going concern. The Group’s capital includes ordinary share capital. There are no externally imposed capital requirements. The working capital position of the Group as at 30 June 2023 is as follows: Cash and cash equivalents Trade and other receivables Prepayments Trade and other payables Lease liability Provisions – employee entitlements Working capital position Movement reconciliation Ordinary shares Balance 30 June 2021 Date Quantity Issued Price $ 303,229,906 130,184,218 13. Reserves Exercise of unlisted cashless options 8/11/2021 150,243 Exercise of unlisted cashless options 8/11/2021 150,243 Exercise of unlisted cashless options 10/11/2021 149,254 Exercise of unlisted cashless options 10/11/2021 149,254 Exercise of unlisted cashless options 10/11/2021 129,353 Exercise of unlisted cashless options 10/11/2021 746,266 Shares to Vittangi property owners 22/04/2022 270,000 Other adjustments Less transaction costs Balance 30 June 2022 1.97 1.97 2.01 2.01 2.01 2.01 1.19 296,004 296,004 300,000 300,000 260,000 1,499,994 321,300 15,005 - (a) Unlisted option reserve (b) Listed option reserve (c) Foreign currency reserve (d) Financial assets reserve Total reserves a. Unlisted option and performance rights reserve 304,974,519 133,472,526 Placement 13/10/2022 20,100,000 1.10 22,110,000 Exercise of unlisted options 21/10/2022 162,343 1.20 194,000 Balance at the start of the financial year Share Purchase Plan 28/10/2022 9,090,858 1.10 10,000,000 Share-based payment options issued Placement 23/02/2023 25,806,452 1.55 40,000,001 Balance at the end of the financial year Exercise of performance rights 9/03/2023 500,000 Placement for land purchase 30/06/2023 120,000 Less transaction costs Balance 30 June 2023 360,754,172 1.41 1.49 705,000 178,200 (3,225,230) 203,434,497 The unlisted options and performance rights reserve is to record the value of equity benefits provided to employees and Directors as part of their remuneration. 2023 $ 2022 $ 38,226,375 13,012,565 2,516,244 1,517,074 687,970 858,892 (4,818,877) (4,024,562) (2,367,172) (574,417) (978,791) (783,731) 33,265,749 10,005,821 2023 $ 2022 $ 17,659,177 14,483,975 843,939 843,939 1,394,623 838,945 (18,657) (18,657) 19,879,082 16,148,202 2023 $ 2022 $ 14,483,975 10,333,865 3,175,202 4,150,110 17,659,177 14,483,975 Talga GroupAnnual Report 2023 92 93 b. Listed option reserve 2023 $ 2022 $ 14. Accumulated losses Balance at the start of the financial year 843,939 861,107 2023 $ 2022 $ Movement during the year Balance at the end of the financial year The listed option reserve represents the value of 45.5m options issued to shareholders in December 2018 for $0.02 which were exercisable at $0.45 and expired in December 2018. - (17,168) Balance at the beginning of the financial year (122,973,151) (86,173,831) 843,939 843,939 Impact of change in accounting policy (Loss) for the year - - (43,356,066) (36,799,320) Balance at the end of the financial year (166,329,217) (122,973,151) c. Foreign currency reserve Balance at the start of the financial year Movement during the year Balance at the end of the financial year The foreign currency translation reserve represents exchange differences arising from the translation of non-AU dollar functional currency operations within the Group into Australian dollars. 2023 $ 2022 $ 838,945 (143,285) 555,678 982,230 15. Cashflow information Reconciliation of cash flows from operating activities with loss after income tax 2023 $ 2022 $ 1,394,623 838,945 Loss after income tax (43,356,066) (36,799,320) Non-cash flows in loss for the year Depreciation expense - office and field equipment and right of use assets 3,753,750 972,187 d. Financial asset reserve Balance at the start of the financial year Movement during the year Balance at the end of the financial year Total Reserves 2023 $ 2022 $ (18,657) 35,000 - (53,657) (18,657) (18,657) 19,879,082 16,148,202 The financial asset reserve represents the revaluation of investments in shares recognised through other comprehensive income. Lease interest Share based payment Foreign exchange loss Other non-cash items Changes in assets and liabilities 90,681 40,325 4,074,202 7,102,110 451,476 2,736,487 (1,297,904) 35,424 Decrease (increase) in trade and other receivables (1,123,698) 835,768 Increase (decrease) in trade and other payables Decrease (increase) in prepayments Decrease (increase) in inventory Increase (decrease) in provisions 794,315 (943,369) 170,922 (821,322) - 16,268 195,060 277,275 Net cash outflows from operating activities (36,247,262) (26,548,167) Non-Cash Financing and Investing Activities There have been non-cash financing and investing activities for the 2023 financial year where 120,000 shares were issued in consideration of the land access and acquisition agreement at the Vittangi Project ($178,200) and cashless exercise of 162,343 unlisted options ($194,000) and exercise of 500,000 performance rights. In 2022: 270,000 shares were issued in consideration of land access and acquisition agreement at the Vittangi Project ($321,300) and cashless exercise of options amounting to $2,952,000. Talga GroupAnnual Report 2023 94 95 16. Loss per share 2023 $ 2022 $ b. Remuneration of Director and Key Management Personnel The aggregate compensation paid to Directors and other KMP of the Group and recognised as an expense during the Reporting Period is set out below: Net loss used in calculating the basic loss per share (43,356,066) (36,799,320) Weighted average number of shares on issue during the 360,754,172 304,219,883 financial year used in the calculation of basic loss per share Basic loss per share (cents per share) Diluted loss per share (cents per share) (12.0) (12.0) (12.1) (12.1) Post-employment benefits Share-based payments Total Number Number Short-term employee benefits 2023 $ 2022 $ 1,788,081 2,017,567 107,475 110,561 3,981,770 3,759,876 5,877,326 5,888,004 This calculation does not include shares under option that could potentially dilute basic earnings per share in the future as the Group has incurred a loss for the year, and therefore those options are anti-dilutive. See note 13 (a) for unlisted options and performance rights that could potentially dilute basic earning per share in the future, but not included in the calculation of diluted earnings per share. c. Remuneration options and performance rights: granted and vested during the year The total expense recognised in the 2023 financial year for the options and performance rights issued to Key Management Personnel was $5,103,770 (2022: $3,759,876). During the year ended 30 June 2023, the value of options and performance rights granted to Directors and Key Management Personnel was calculated applying the following inputs: 17. Key management personnel compensation Vested Granted Exercise price Share market price at grant date Valuation per Option / Right Exercise date Valuation date Expiry date a. Directors and Specified Executives The names and positions held by Key Management Personnel (“KMP”) in office at any time during the year are: Key Management Personnel Position Duration of appointment Terry Stinson Mark Thompson Grant Mooney Stephen Lowe Ola Rinnan Non-Executive Chair Appointed 8 February 2017 Managing Director Appointed 21 July 2009 Non-Executive Director Appointed 20 February 2014 Non-Executive Director Appointed 17 December 2015 Non-Executive Director Appointed 7 August 2017 Martin Phillips Chief Operating Officer Appointed 1 July 2017 Melissa Roberts Chief Financial Officer Appointed 2 August 2021 Martin Phillips 500,000 500,000 Martin Phillips Martin Phillips Martin Phillips Melissa Roberts Talga Group employees - - - - - 500,000 500,000 500,000 500,000 847,900 - - - - - - $1.39 $1.39 9/03/2023 14/11/2022 31/12/2025 $1.39 $1.39 $1.39 $1.39 - - 14/11/2022 31/12/2025 14/11/2022 31/12/2025 $1.43 $1.43 - 23/12/2022 31/12/2025 $1.43 $1.43 - 23/12/2022 31/12/2025 $1.48 $1.48 - 31/03/2023 31/03/2025 d. Related party transactions No related party transactions occurred during the current or prior financial year. Talga GroupAnnual Report 2023 96 97 18. Auditors’ remuneration Fees to Ernst & Young Amounts received or due and receivable by Auditor and related network firms for: Audit or review of the financial statements — Group — Controlled entities Other services - Taxation advice and compliance services Total fees to Ernst & Young Fees to Stantons International Amounts received or due and receivable by Auditor and related network firms for: Audit or review of the financial statements — Group — Controlled entities Other assurance services Total fees to Stantons International Other Auditors and firms: Audit or review of the financial reports — Subsidiaries — Non-audit services — Taxation advice and compliance services Total fees to other Auditors and firms Total Auditors’ Remuneration 19. Commitments The Group does not have any minimum exploration or development commitments. 2023 $ 2022 $ 83,200 8,440 107,039 198,679 - - - - 96,721 89,805 - - - - 96,721 89,805 12,911 6,489 4,867 15,000 - - 24,267 15,000 319,667 104,805 Annual Report 2023Talga Group 98 99 20. Financial instruments Financial Risk Management Policies The Group’s financial instruments consist of deposits with banks, receivables, payables, and lease liabilities. No financial derivatives are held. Financial Risk Exposures and Management The main risk the Group is exposed to through its financial instruments is interest rate risk. Interest Rate Risk Interest rate risk is managed by obtaining the best commercial deposit interest rates available in the market by the major Australian Financial Institutions. Credit Risk Exposures Credit risk represents the loss that would be recognised if the counterparties default on their contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. The Group does not have any significant credit risk to any single counterparty or any group of counterparties having similar characteristics. The credit risk on financial assets of the Group, which have been recognised in the Statement of Financial Position, is the carrying amount, net of any provision for doubtful debts. Group 1: new customers (less than 6 months). Group 2: existing customers (more than 6 months) with no defaults in the past. Group 3: existing customers (more than 6 months) with some defaults in the past. All defaults were fully recovered. Cash at bank and short term deposits are held in financial institutions which must have a minimum AA2 rating. i. Liquidity Risk Liquidity risk is the risk that the Group might be unable to meet its financial liability obligations. The Group manages liquidity risk by monitoring forecast cash flows. The Group does not have any significant liquidity risk as the Group does not have any collateral debts. ii. Net Fair Values The net fair values of: — Other financial assets and other financial liabilities approximate their carrying value. iii. Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks. Interest Rate Sensitivity Analysis At 30 June 2023, the effect on loss as a result of changes in the interest rate, with all other variables remaining constant would be as follows: Trade and other current receivables Group 1 Group 2 Group 3 2023 2022 $ - $ - Change in loss Increase in interest rate by 100 basis points 382,264 130,126 Decrease in interest rate by 100 basis points (382,264) (130,126) 2023 $ 2022 $ 2,516,242 1,517,074 - - Change in equity Total trade and other current receivables 2,516,242 1,517,074 Cash at bank and short-term deposits Total cash at bank and short-term deposits 38,226,375 13,012,565 38,226,375 13,012,565 Increase in interest rate by 100 basis points 382,264 130,126 Decrease in interest rate by 100 basis points (382,264) (130,126) Talga GroupAnnual Report 2023 100 101 Floating Fixed interest rate interest rate $ $ Non interest bearing $ Weighted average Total interest rate $ % iv. Foreign currency risk At 30 June 2023, the parent has a loan receivable from Foreign exchange risk arises from future commercial Talga Mining Pty Ltd of AUD 1,662,525 (2022: A$1,662,525); transactions and recognised assets and liabilities a loan receivable from Talga AB of SEK 552,873,198 denominated in a currency that is not the entity’s or A$76,911,858 equivalent (2022: SEK 360,197,043 or 2023 Financial Assets Cash and cash equivalents 3,416,557 34,300,000 509,818 38,226,375 1.5% Trade and other receivables Security Deposit Other financial assets - - - - 3,084,849 3,084,849 53,925 514,683 568,608 - - - - 3.4% - Total financial assets 3,416,557 34,353,925 4,109,350 41,879,832 Financial Liabilities Trade and other payables Lease Liability Total financial liabilities 2022 Financial Assets - - - - 4,818,877 4,818,877 2,367,172 - 2,367,172 2,367,172 4,818,877 7,186,049 Cash and cash equivalents 13,004,158 157 8,250 13,012,565 0.1% Trade and other receivables Security deposit Other financial assets - - - - 1,517,074 1,517,074 20,900 423,177 444,077 - - - - - - Total financial assets 13,004,158 21,057 1,948,501 14,973,716 Financial liabilities Trade and other payables Lease liabilities Total financial liabilities - - - - 4,024,562 4,024,562 1,695,472 - 1,695,472 1,695,472 4,024,562 5,720,034 functional currency. The Group conducts exploration, mining development and battery anode production activities in Sweden (transaction currency is SEK), product development in the United Kingdom (transaction currency is GBP) as well as Germany where the Group is developing a graphite/graphene pilot plant facility (transaction currency is EUR). The Group is subject to foreign currency value fluctuations in the course of its operations. To mitigate the Group’s exposure currency rates are monitored regularly and funds are transferred to the foreign operations when rates are more favourable and also plans to curtail this impact by paying foreign currency invoices in a timely fashion. A$51,026,711 equivalent); a loan receivable from Talga Battery Metals AB of SEK 15,157,009 or A$2,108,537 equivalent (2022: SEK 14,390,034 or A$2,038,540 equivalent); a loan receivable from Talga Technologies Limited of GBP 5,913,122 or A$11,263,089 equivalent (2022: GBP 5,331,649 or A$9,401,603 equivalent); a loan receivable from Talga Anode UK Limited of GBP 2,303,554 or A$4,387,721 equivalent (2022: GBP 1,692,784 or A$2,959,208 equivalent); and a loan receivable from Talga Advanced Materials GmbH of EUR 13,627,881 or A$22,278,700 equivalent (2022: EUR 3,340,803 or A$5,076,317 equivalent). A 5% movement in foreign exchange rates would increase or decrease loss before tax by approximately $5,847,495. The company fully provided for inter-company loans at the reporting date. As at 30 June 2023, the Group had cash and cash equivalents denominated in foreign currencies amounting to AUD 297,151 (2022: AUD 1,849,290). Talga GroupAnnual Report 2023 102 103 21. Segment note Operating segments are identified on the basis of internal The Group operates in three operating segments being reports about components of the Group that are regularly graphite exploration, graphite development; and research reviewed by the chief operating decision maker in order and development in four geographical locations, being 2023 Segment assets as at 30 June 2023 Australia United unallocated Sweden Germany Kingdom corporate $ $ $ $ Total $ Segment assets as at July 2022 12,678,643 2,206,937 5,946,185 12,319,577 33,151,342 to allocate resources to the segment and to assess its graphite exploration and development in Sweden, graphite/ Movement performance. The term ‘chief operating decision maker’ graphene research and development in Germany and identifies a function, not necessarily a manager with a research and development in the United Kingdom, with Cash and cash equivalents (752,503) (275,779) (532,107) 26,774,198 25,213,809 specific title. That function is to allocate resources to and Australia as unallocated corporate. This is the basis on which Grant funding receivable 1,041,630 289,374 (1,258,361) 1,495,134 1,567,777 assess the performance of the operating segments of an internal reports are provided to the Directors for assessing entity. The Company’s Board is the chief operating decision performance and determining the allocation of resources maker as it relates to segment reporting. within the Group. Financial assets - - - - - Plant and equipment 4,899,517 880,356 481,894 (164,546) 6,097,221 Exploration and evaluation (265,948) - - - (265,948) Australia United unallocated Sweden Germany Kingdom corporate $ $ $ $ Total $ expenditure Other (235,534) (36,105) (10,007) (333,354) (615,000) 17,365,805 3,064,783 4,627,604 40,091,009 65,149,201 Reconciliation of segment assets to total assets Other assets Total assets from continuing operations Segment liabilities - 65,149,201 Segment liabilities as at (4,359,314) (764,256) (1,359,691) (1,681,578) (8,164,839) 30 June 2023 Reconciliation of segment liabilities to total liabilities Unallocated items Total liabilities from continuing operations - (8,164,839) 2023 Segment performance Revenues from ordinary activities 241,360 35,431 1,601 1,180 279,572 Other Income 125,625 67,147 937,856 583,700 1,714,328 Total segment revenue 366,985 102,578 939,457 584,880 1,993,900 Segment expense (including write-offs) (25,460,851) (2,973,445) (2,885,466) (14,030,204) (45,349,966) Major segment expense breakdown Trial mine and anode production (11,805,665) - - R&D and test facility - (1,904,558) (2,187,002) Exploitation and studies (6,319,067) Exploration (756,927) Employee and Director fees - - - - - - - - - - - (3,917,088) Admin, compliance and regulatory (3,011,291) (419,299) (659,029) (5,756,660) Share based payments - - - (4,074,202) Reconciliation of segment result to net loss before tax Segment Result Unallocated items Net loss before tax from continuing operations (43,356,066) - (43,356,066) Talga GroupAnnual Report 2023 104 105 Sweden Germany Kingdom corporate Australia United unallocated Total $ 2022 Segment liabilities Australia United unallocated Sweden Germany Kingdom corporate $ $ $ $ Total $ - 16,420 Segment liabilities as at 2,770,883 452,486 1,839,804 1,440,592 6,503,765 2022 Segment performance $ Revenues from ordinary activities 16,420 $ - $ - Other Income - 2,180 600,599 45,381 648,160 Total segment revenue 16,420 2,180 600,599 45,381 664,580 Segment expense (including write-offs) (15,499,103) (2,604,699) (3,355,629) (16,004,469) (37,463,900) Major segment expense breakdown Trial mine and anode production (1,823,592) - - R&D and test facility - (2,221,563) (2,862,035) Exploitation and studies (7,911,689) Exploration (3,259,532) Employee and Director fees Admin, compliance and regulatory Share based payments - - - - - - - - - (3,691,963) (349,605) (349,605) (4,183,532) - - (7,102,110) $ - - - - Reconciliation of segment result to net loss before tax Segment Result Unallocated items Net loss before tax from continuing operations Segment assets as at 30 June 2022 (36,799,320) - (36,799,320) 30 June 2022 Reconciliation of segment liabilities to total liabilities Unallocated items Total liabilities from continuing operations 22. Subsequent events - 6,503,765 Other than as disclosed in this section, there has not been — Early works in preparation for Luleå Anode Refinery any other matter or circumstance occurring subsequent to construction commenced following approved the end of the financial year that has significantly affected environmental permit gaining legal force. or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. — Final stage of statutory appeals process commenced with Supreme Court reviewing submissions following the Court of Appeal’s decision to uphold Talga’s approved Nunasvaara South mine environmental and Natura 2000 permit. — Banking consortium of credit agencies and European commercial banks selected to provide all debt funding for Vittangi Anode Project, complementing European Investment Bank. Segment assets as at July 2021 2,589,774 2,880,019 2,665,059 52,831,646 60,966,498 Movement Cash and cash equivalents 266,789 82,422 420,701 (40,254,865) (39,484,953) Grant funding receivable (704,701) (276,666) 640,157 (865,509) (1,206,719) Financial assets - - - (585,000) (585,000) 23. Related parties Plant and equipment 10,078,879 (429,152) 1,830,025 673,589 12,153,341 Related party transactions with management personnel are disclosed in note 17. Exploration and evaluation 132,170 - - - 132,170 expenditure Other 315,732 (49,686) 390,243 519,716 1,176,005 12,678,643 2,206,937 5,946,185 12,319,577 33,151,342 Reconciliation of segment assets to total assets Other assets Total assets from continuing operations - 33,151,342 Talga GroupAnnual Report 2023 106 107 24. Parent information 25. Controlled entities The following information has been extracted from the books and records of the parent and Talga Group Ltd has a 100% direct and indirect interest in the following subsidiaries: Name of Entity Country of Incorporation 30 June 2023 30 June 2022 Percentage Owned (%) * has been prepared in accordance with Australian Accounting Standards. Statement of financial position Assets Current assets Non-Current assets Total assets Liabilities Current liabilities Non-Current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Reserves Total equity 2023 $ 2022 $ Talga Mining Pty Ltd Talga Advanced Materials GmbH Australia Germany 38,159,130 11,645,978 Talga Technologies Limited United Kingdom 854,932 777,334 Talga Anode UK Limited United Kingdom 39,014,062 12,423,312 Talga AB 2,205,698 1,396,541 Talga Tech AB (incorporated on 25/08/2021) Talga Battery Metals AB Sweden Sweden Sweden 19,071 94,542 Jalk Graphite AB (incorporated on 25/08/2021) Sweden 2,224,769 1,491,083 Raita Graphite AB (incorporated on 25/08/2021) Sweden 36,789,293 10,932,229 * Percentage of voting power is in proportion to ownership. 203,419,391 133,472,526 (185,557,747) (137,849,553) 18,927,650 15,309,256 36,789,294 10,932,229 26. Share based payments 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Statement of profit or loss and other comprehensive income Net (loss) for the year (13,445,325) (45,787,607) The expense recognised for the financial year, including The following share based payments in the form of what is disclosed at note 17(c) for options and performance performance rights were granted during the year: rights that were granted in the current and previous years Total comprehensive (loss) for the year (13,445,325) (45,787,607) was $4,074,202, this includes $899,000 cashless exercise of Talga Group Ltd has not entered into cross guarantees in relation to the debts of its wholly owned subsidiaries. There are no guarantee contingencies and subsequent events other than mentioned elsewhere in this report. options and performance rights, (2022: $2,952,000). Share based payments for the financial year have been determined by allocating the grant date value on a straight line basis over the period from grant date to vesting date with the relevant proportion expensed for this financial year. The Company will transfer or allot to the Participant that number of Shares equal in value to the positive difference between the then Market Value of the Shares at the time of exercise and the Exercise Price that would otherwise be payable to exercise those Convertible Securities. Series 1: 1,500,000 performance rights granted 14/11/2022 Series 2: 500,000 performance rights granted 23/12/2022 Series 3: 500,000 performance rights granted 23/12/2022 Series 4: 847,000 performance rights granted 17/05/2023 Talga GroupAnnual Report 2023 108 109 Grant date share price Series 1 $1.39 Series 2 Series 3 Series 4 $1.43 $1.43 $1.48 These performance rights were valued at the share price at grant date. 2023 Weighted average 2022 Weighted average Number of exercise price Number of exercise price options / rights $ options / rights Balance at beginning of financial year 13,400,000 0.98 12,900,000 Rights granted during the 3,347,000 - 2,500,000 financial year $ 0.69 2.11 Expired unvested during the (3,400,000) 0.13 - - financial year Exercised during the financial year (900,000) 0.39 (2,000,000) Balance at end of the financial year 12,447,000 0.82 13,400,000 Exercisable at end of the financial year 500,000 1.93 500,000 0.53 0.98 1.93 The share based payment options and performance rights outstanding at the end of the financial year had a weighted average exercise price of $0.82 (2022: $0.98) and a weighted average remaining contractual life of 1.29 years (2022: 1.87 years). Unlisted share options and performance rights During the period ending 30 June 2023, the Group had — 500,000 unlisted options with an exercise price of 16,347,900 ordinary shares under option or subject to $1.93 cents expiring on 04 July 2024; performance rights (unlisted) either by cash or non-cash settlement. Vesting conditions: Vesting immediately. — 3,000,000 unlisted options with an exercise price of — 2,000,000 unlisted options with an exercise price of $0.71 cents expiring on 23 October 2022; $2.16 cents expiring on 14 September 2024; Vesting conditions: Vested upon the successful commissioning of the Vittangi Project. Lapsed unexercised on 23 October 2022. — 400,000 unlisted options with an exercise price of $0.71 cents expiring on 23 October 2022; Vesting conditions: Vested upon the completion of the successful commissioning of Talga’s commercial scale plant. Lapsed unexercised on 23 October 2022. — 5,000,000 unlisted options with an exercise price of $1.12 cents expiring on 31 December 2023; Vesting conditions: Vested upon the execution of binding documentation for commercial financing of the development of the Vittangi Anode Project. Vesting conditions: Vested upon the execution of binding documentation for commercial financing of the development of the Vittangi Anode Project. Vesting date 30 November 2023. — 1,500,000 unlisted performance rights with an exercise price of $0.0 cents expiring on 31 December 2025; Vesting conditions: Vested upon remaining employed on the following dates 31 December 2022 - 500,000; 31 December 2023 - 500,000; 30 June 2025 - 500,000. — 1,000,000 unlisted performance rights with an exercise price of $0.0 cents expiring on 31 December 2025; Vesting conditions: Vested upon the commencement of steady state of production of the Vittangi Anode Project. Vesting date 30 November 2023. Vesting date 31 March 2025. — 2,100,000 unlisted performance rights with an exercise — 847,900 unlisted performance rights with an exercise price of $0.0 cents expiring on 31 December 2023; price of $0.0 cents expiring on 31 March 2025. Vesting conditions: Vested upon the execution of binding documentation for commercial financing of the development of the Vittangi Anode Project. Vesting date 30 November 2023. Vesting conditions: Vested upon remaining employed on 30 September 2024. Vesting date 31 March 2025. 27. Contingent liabilities There were no contingent liabilities as at 30 June 2023. Talga GroupAnnual Report 2023 110 111 Directors’ declaration The Directors of the Company declare that: 3. Subject to the matters disclosed in note 1, the 1. The financial statements and notes, as set out on pages 68 to 109, are in accordance with the Corporations Act 2001: Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. a. b. comply with Accounting Standards; of the Board of Directors. This declaration is made in accordance with a resolution are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in note 1 to the financial statements; and c. give a true and fair view of the financial position as at 30 June 2023 and of the performance for the year ended on that date of the Group. 2. The Chief Executive Officer and Chief Financial Officer have each declared that: Mark Thompson Managing Director Perth, Western Australia 29 September 2023 a. the financial records of the Group for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with the Accounting Standards; and c. the financial statements and notes for the financial year give a true and fair view. Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Independent auditor’s report to the directors of Talga Group Ltd and controlled entities Report on the audit of the financial report Opinion We have audited the financial report of Talga Group Ltd (the Company) and controlled entities (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 in the financial statements, which describes the principal conditions that raise doubt about the Group’s ability to continue as a going concern. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Talga GroupAnnual Report 2023 112 2 113 3 Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matter described below to be the key audit matter to be communicated in our report. For the matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying financial report. Share Based Payments Why significant How our audit addressed the key audit matter As disclosed in Note 26 to the financial report, the Group has awarded share-based payments to its employees and directors, contributing to a total share-based payment expense of $4.1 million for the year ended 30 June 2023. Due to the complex accounting treatment associated with share-based payments, and the judgmental estimates used in determining their fair value, we considered accounting for share-based payments to be a key audit matter. Our audit procedures included the following: ► We obtained an understanding of the underlying transactions by reviewing agreements, minutes of Board and Committee meetings and ASX announcements. ► We involved our valuation specialists to test the Group’s measurement of the fair value of share- based payments issued during the year, including the assumptions used. ► We assessed the allocation of the share-based payment expense over the relevant vesting period. ► We assessed whether the accounting treatment was in accordance with the requirements of Australian Accounting Standards. ► We assessed the adequacy of the financial report disclosures contained in Note 26 of the financial report. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2023 annual report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2023 114 4 115 5 Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young T S Hammond Partner 29 September 2023 ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 27 to 34 of the sdirectors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Talga Group Ltd and controlled entities for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2023 116 117 Additional shareholder information The following additional information is required by the Australian Securities Exchange Limited Listing Rules. Unmarketable parcels Information was prepared based on the share registry The number of holders of less than a marketable parcel of information processed up to 25 September 2023. ordinary shares is 1,052. Statement of quoted securities Substantial shareholders Listed on the Australian Securities Exchange are 360,754,172 There are no shareholders who hold 5% or more of the fully paid ordinary shares as at 25 September 2023. issued capital in Talga Group Ltd. Distribution of shareholding Restricted securities The distribution of members and their holdings of equity 120,000 shares are subject to a voluntary escrow until securities in the Group as at 25 September 2023 were 30 June 2024. There are no other restricted securities of Talga Group Ltd. as follows: Spread of holdings 1-1,000 5,001 - 10,000 12,918,215 1,685 On a poll each ordinary share is entitled to one vote. There 10,001 - 100,000 80,459,395 100,001 and over 253,020,551 2,628 378 Totals 360,754,172 12,616 are no voting rights attached to any class of options or performance rights. 20 Largest shareholders and option holders The names of the twenty largest ordinary fully paid shareholders as at the 25 September 2023 are as follows: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Number held % Held Ordinary shares Citicorp Nominees Pty Limited BNP Paribas Nominees Pty LtdJP Morgan Nominees Australia Pty Limited Lateral Minerals Pty Ltd BNP Paribas Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees Pty Ltd ACF Clearstream HSBC Custody Nominees (Australia) Limited – A/C 2 BNP Paribas Nominees Pty Ltd 5,925,447 Yandal Investments Pty Ltd Mr Anthony Neil Holman Australian Executor Trustees Limited 5,500,000 4,000,000 3,090,403 Methuselah Capital Management Pty Ltd 2,303,255 35,686,637 24,683,026 15,996,320 14,382,174 13,182,138 12,481,150 7,105,034 6,052,035 2,115,932 1,825,000 1,815,905 1,754,589 1,485,164 1,450,206 1,416,972 9.89 6.84 4.43 3.99 3.65 3.46 1.97 1.68 1.64 1.52 1.11 0.86 0.64 0.59 0.51 0.50 0.49 0.41 0.40 0.39 Two Tops Pty Ltd EST Mr Kevin Graham Danks Mr Kin Chun Wong HSBC Custody Nominees (Australia) Limited Mr John Oliver Dougan Fitz-Henry Mr Graham John Morton Fully paid Total ordinary shares shareholders Voting rights 20 Neweconomy com au Nominees Pty Limited <900 Account> 1,001 - 5,000 12,429,013 1,926,998 3,231 4,694 In accordance with the Group’s Constitution, on a show of hands every member present in person or by proxy or attorney or duly authorised representative has one vote. Top 20 holders of ordinary shares 162,251,387 44.97 Talga GroupAnnual Report 2023 118 119 Unquoted equity securities As at 25 September 2023, the following unquoted securities were on issue: Expiry date 31-Dec-23 04-Jul-24 14-Sep-24 Total on issue Exercise price Number on issue Number of holders $1.12 $1.93 $2.16 5,000,000 500,000 2,000,000 7,500,000 2 1 1 Unlisted options with the following terms: Expiry date 31-Dec-23 31-Dec-25 31-Mar-25 Total on issue Exercise price Number on issue Number of holders Nil Nil Nil 2,100,000 2,000,000 847,900 4,947,000 4 2 52 All the above options and performance rights were issued under the Company employee securities incentive scheme. Corporate governance statement The overall goals of the corporate governance process are to: Talga has followed the ASX Principles where the Board — support realisation of shareholders value; — assure a prudential and ethical base to the Company’s conduct and activities; and — ensure compliance with the Company’s legal and regulatory obligations. The Board of Talga is committed to implementing the highest standards of corporate governance in conducting its business. The Board has established a corporate governance framework including corporate governance policies, has considered the recommendation to be an appropriate benchmark for its corporate governance practices. In compliance with the “if not, why not” reporting regime, where, after due consideration, Talga’s corporate governance practices do not follow an ASX Principles recommendation, the Company has explained its reasons for not following the recommendation and disclosed what, if any, alternative practices Talga has adopted. This corporate governance statement sets out the Company’s corporate governance policies and practices and is current as at 4 October 2023 as approved by the Talga Board. procedures and charters with reference to the fourth edition The eight ASX Principles and Talga’s position in respect of of the ASX Corporate Governance Council’s Principles and each of them, are detailed in this statement. Recommendations (“ASX Principles”). Further information on Talga’s corporate governance policies, procedures and charters are available on Talga’s website, talgagroup.com. Talga GroupAnnual Report 2023 120 121 Principle 1: Lay solid foundations for management and oversight Roles and responsibilities Upon appointment, each Director receives a written agreement which sets out the terms of their appointment, Performance evaluation practices Diversity policy The Board has adopted a Board Charter (disclosed on along with a deed of indemnity, insurance and access The Company has a Performance Evaluation Practices Policy The Company has adopted a Diversity Policy (as disclosed the Company’s website) that sets out the roles and and also an induction pack containing information on the (as disclosed on the Company’s website) with processes on the Company’s website) embracing a corporate culture responsibilities of the Board and those functions delegated Company’s vision, values, strategy, governance and risk established to review the Board’s performance and the supporting equal opportunity free from discrimination to Senior Executives. management frameworks. The Company has a written performance of individual Directors (including the Managing related to gender, ethnicity, cultural background, age, or other agreement in place with each Director and Senior Executive. Director) and Senior Executives. The method and scope of personal factors and includes requirements for the Board The Board is collectively responsible for promoting the success of the Company through its key functions of setting Directors are provided with the opportunity to participate strategic direction, overseeing management of the Company, in professional development to develop and maintain providing overall corporate governance, monitoring financial the skills and knowledge needed to perform their role as performance, engaging appropriate management and Directors effectively. Directors commensurate with the desired structure and objectives of the Company, and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct, policy and legal compliance. For further information on the above, please see Talga’s “Procedures for Selection and Appointment of Directors” policy which can be viewed on the Company’s website. The Managing Director, Chief Operating Officer and Chief Financial Officer, supported by other members of the senior Company Secretary management team, are responsible for managing the day to The Company Secretary plays an important role in day activities of the Company and advancing the strategic direction of the Company as set by the Board. Appointment, induction and training supporting the effectiveness of the Board. The Company Secretary is accountable to the Board through the Chair on all matters regarding the proper function of the Board. This includes assisting the Board on governance matters, monitoring compliance with policies and procedures, co- When a vacancy exists on the Board, for whatever reason, ordinating board meetings and acting as the interface or where it is considered that the Board would benefit from between the Board and Senior Executives. Details regarding the services of a new Director, the Board will determine the Company Secretary, including their experience and the selection criteria for the position based on factors qualifications are set out in the Directors’ Report section of deemed necessary for the Board to best carry out its the 2023 Annual Report. responsibilities. Nomination factors include, but are not limited to, competencies and qualifications, independence, other Directorships, time availability, contribution to the overall balance of the composition of the Board and depth of understanding of the role and legal obligations of a Director. The Company has not made any new appointments to the Board since the last Annual Report. Should the Company appoint a new Director in the future, appropriate checks including criminal record and bankruptcy history, will be undertaken prior to the appointment. Information about a candidate standing for election or re-election as a Director is provided to shareholders via the Notice of Meeting and where relevant, the information contained in the Annual Report. the performance evaluation is set by the Board and may to develop measurable objectives for achieving diversity include a Board self-assessment checklist/questionnaire to and annually assess both the objectives and the progress be completed by each Director as well as the use of external in achieving those objectives as positions become available. specialist consultants. The Chair is responsible for conducting the performance appraisals of the Non-Executive Directors in conjunction with each Non-Executive Director. The Board will review The Company is committed to diversity and recognises the benefits arising from a diverse mix of skills and talent amongst its Directors, officers and employees to enhance Company performance and achieve the Company’s goals. the performance of the Managing Director. A review of the Whilst the Company does not currently comply with performance of the Managing Director was conducted ASX recommendation 1.5 (c) to establish measurable during the period. The Chair and the Board regularly discussed the performance and composition of the Board during the financial year, considering issues or concerns as they arose. This ongoing process has remained in-house and informal throughout the year, relying on regular discussion. The Board together with the Remuneration Committee is responsible for evaluating the performance of the Company’s Senior Executives. This is performed annually, meeting formally with each Senior Executive and ongoing informal monitoring throughout each financial year. Formal evaluation appraisals of Senior Executives were conducted during the financial year in accordance with this policy. targets for achieving gender diversity across the group, the Remuneration Committee has been tasked with the process for the appointment of a new female board member. The process for selection, recruitment and appointment has commenced in line with Talga’s Nomination Charter. The Company is progressing measurable objectives in its commitment to gender diversity and towards achieving a board composition of no less than 30% of its Directors of each gender. The proportion of female and male employees across the whole organisation as at 30 June 2023 was 43% and 57% respectively. Currently the Board comprises five members, all of whom are male. One Senior Executive position is female. A Senior Executive office holding below the Board level, includes the Company Secretary, Chief Operating Officer and Chief Financial Officer. The Company is not a “relevant employer” under the Workplace Gender Equality Act. Talga GroupAnnual Report 2023 122 123 Principle 2: Structure the board to be effective and add value Nomination committee Board skills and experience Board independence Materiality is considered from both a quantitative and qualitative perspective. An item is presumed to be Whilst the Company does not comply with ASX The Company’s objective is to have a Board with the The Board considers the independence of Directors having quantitatively immaterial if it is equal to or less than 5% of recommendation 2.1 to establish a Nomination Committee, appropriate mix of skills, expertise and experience to regard to the relationships listed in Box 2.3 of the ASX an appropriate base amount. Qualitative factors considered as discussed above, the Remuneration Committee has effectively discharge the duties of the Board. The Board Corporate Governance Principles and Recommendations include the nature of the relationship or contractual assumed the role of a Nomination Committee to appoint collectively has a combination of skills and experience as set and the Company’s materiality thresholds, namely whether arrangement and factors that could materially interfere with a female Director. The Board considers that at this stage out in the table below. A profile of each Director setting out a Director: the independent exercise of the Director’s judgement. there would be no efficiencies or other benefits gained by their skills, experience, expertise, is set out in the Directors’ establishing a separate Nomination Committee. Accordingly, Report section of the 2023 Annual Report. the Remuneration Committee will from time to time assume those responsibilities that are ordinarily assigned to a Nomination Committee and has addressed the skill-set of Expertise Mineral Exploration current Board members and the future need to expand that skill-set by way of appointment of new Directors. The Board has adopted a Nomination Committee Charter (as disclosed on the Company’s website) which describes the role, functions, responsibilities and processes of the full Board in its capacity as the Nomination Committee. Items that are usually required to be discussed by a Nomination Committee are marked as separate agenda items at Board meetings when required. Commercial & Legal Finance/Accounting Governance & Compliance Strategy & Risk Management Capital Markets Project Development Industry Mineral Resources Capital Markets Renewable Energy Materials Automotive Aerospace Maritime Defence Qualifications Business & Accounting Taxation Geology Construction & Materials Technology The Board reviews its composition on a regular basis to consider where it is appropriate and relevant to further strengthen the Board through its development strategy. — is, or has been, employed in an Executive capacity by the Company or any of its subsidiaries and there has not been a period of at least three years between ceasing such employment and serving on the Board; — is, or has been within the last three years, in a material business relationship (e.g. as a supplier, professional adviser, consultant or customer) with the Company or any of its subsidiaries, or an officer of, or otherwise associated with, someone with such a relationship; — is, represents, or has been within the last three years Non-Executive Directors currently hold performance rights (see the Directors’ Report, Option, Right and Shareholdings of Directors and Officers section and note 25 to the financial statements) with performance milestones that are aligned to the near-term business strategy of financing and developing the Company’s flagship Vittangi Anode Project. The Board has determined that this does not interfere, or might reasonably be seen to interfere, with the Directors’ capacity to bring independent judgement to bear on issues before the board and to act in the best interests of the entity as a whole rather than in the interests of an individual security an officer or employee of, or professional adviser to, a holder or other party. Consequently, and in accordance with the definition of independence above and the materiality thresholds, the independent Directors of the Company are Grant Mooney (Non-Executive Director since 20 February 2014), Stephen Lowe (Non-Executive Director since 17 December 2015), Terry Stinson (Non-Executive Chair since 8 February 2017) and Ola Rinnan (Non-Executive Director since 7 August 2017). The Board recognises the ASX recommendations that the majority of the Board should be comprised of independent Directors (Recommendation 2.4) and the Chair of the Board should be an independent Director (Recommendation 2.5). The Company complies with these recommendations. substantial shareholder; — has close personal ties with any person who falls within any of the categories described above; — receives performance-based remuneration (including options or performance rights) from, or participates in an employee incentive share scheme of, the entity; or — has been a Director of the Company for such a period that his or her independence may have been compromised. In each case, independence is a matter of judgement for the Board as a whole and the materiality of the interest, position or relationship needs to be assessed by the board to determine whether it might interfere, or might reasonably be seen to interfere, with the Director’s capacity to bring an independent judgement to bear on issues before the board and to act in the best interests of the entity as a whole rather than in the interests of an individual security holder or other party. Talga GroupAnnual Report 2023 124 125 Principle 3: Instil a culture of acting lawfully, ethically and responsibly Principle 4: Safeguard integrity of corporate reporting Code of conduct Conflict of interest Audit and risk committee CEO and CFO declaration The Company has adopted a Code of Conduct Policy (as Directors must keep the Board advised, on an ongoing basis, The Board has a separate Audit and Risk Committee and The Managing Director and Chief Financial Officer have disclosed on the Company’s website) as to the practices of any interest that could potentially conflict with those of has an Audit and Risk Committee Charter (as disclosed provided a declaration to the Board in accordance with necessary to maintain confidence in the Company’s the Company. Where the Board believes that a significant on the Company’s website) which describes the role and section 295A of the Corporations Act 2001 (Cth) that, in their integrity and objectivity, striving at all times to enhance the conflict exists for a Director on a Board matter, the Director responsibilities of the Audit Committee. opinion, the financial records have been properly maintained reputation and performance of the Company. The Code concerned does not receive the relevant Board papers and provides a framework covering the Board, officers and all is not present at the meeting whilst the item is considered. employees including the responsibility and accountability of In addition, where relevant, the Board has adopted a Board individuals for reporting reports of unethical behaviour and protocol for dealing with confidential information. Details of Director related transactions with the Company are set out in note 17 of the 2023 Annual Report financial statements. conflicts of interest. The Company has also adopted a Whistleblower Policy to deal with issues of actual or suspected unethical, unlawful or undesirable conduct and includes mechanisms whereby employees and others can report their concerns freely and without fear of reprisal or intimidation. In addition the Company has adopted an Anti-bribery and Corruption Policy. Sustainability The Company has developed a Sustainability and People Report which sets out our values and aspirations focusing on three key areas: environment; people and communities; and long-term value. These areas cover responsible value chains (using ethically and environmentally responsible suppliers), governance (conducting business ethically and to a high standard), environmental stewardship (minimising and mitigating our impact on water, land, air quality and biodiversity), social responsibility (respecting the cultures, customs and values of the societies in which we operate whilst working collaboratively with our stakeholders to deliver positive outcomes) and our team (provide a safe, inclusive, supportive and diverse workplace). The full Sustainability and People Report is included as part of the 2023 Annual Report. and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company for the Reporting Period and that their opinion is formed on the basis of a sound system of risk management and internal control which is operating effectively. The Committee comprises three Non-Executive Directors: Stephen Lowe, Terry Stinson and Grant Mooney, and their qualifications and experience together with meetings attended during the year are contained in the Directors’ Report section of the 2023 Annual Report. The Company’s Audit and Risk Committee Charter includes the process for (re)appointing, removal and rotation of an external Auditor. The Board was responsible for the initial appointment of the external Auditor and the Audit Committee for any subsequent appointment of a new external Auditor when any vacancy arises. An external Auditor must be able to demonstrate complete independence from the Company and an ability to maintain independence throughout the engagement period. Furthermore, the Auditor must have arrangements in place for the rotation of the audit engagement partner in accordance with professional standards as current from time to time, including part 2M.4 Division 5 of the Corporations Act 2001 (Cth). The Company’s external Auditor is invited to and attends the Annual General Meeting (“AGM”) to answer questions from shareholders relevant to the audit. Talga GroupAnnual Report 2023 126 127 Principle 5: Make timely and balanced disclosure Principle 7: Recognise and manage risk The Company has adopted a Continuous Disclosure Policy — sets out the obligations of Directors, officers, While the Board’s Charter clearly establishes that the Board Internal audit (as disclosed on the Company’s website). The policy; employees and contractors of the Company to ensure is responsible for ensuring there is a good sound system for that the Company complies with its continuous overseeing and managing risk, the Board has established The Company does not have an internal audit function — raises awareness of the Company’s obligations under disclosure obligations. the continuous disclosure regime; — establishes a process to ensure that information about the Company which may be market sensitive and which may require disclosure is brought to the attention of the person primarily responsible for ensuring that the Company complies with its continuous disclosure obligations in a timely manner and is kept confidential; and Principle 6: Respect the rights of security holders The Company recognises the value of providing current and — meeting with shareholders upon request; relevant information to its shareholders and the Board is committed to open and effective communication, ensuring — responding to direct queries from time to time; and all shareholders are informed of all significant developments — ensuring continuous disclosure obligations are concerning the Company. The Company has in place an effective Shareholder Communications and Investor Relations Policy (as disclosed on the Company’s website). understood across the Company. In addition, shareholders are encouraged to follow the Company’s X account @Talga_Ltd and sign up to the The Company’s Shareholder Communications and Investor Company’s email subscriber list. The Company commits to all substantive resolutions at a meeting of security holders which are to be decided by a poll rather than by a show of hands. Relations program includes: — actively engaging shareholders at the AGM, promoting two-way interaction, by encouraging shareholder interaction during the AGM, including encouraging questions; — issuing regular Company updates; — sending and receiving shareholder communications electronically both from the Company and via the Company’s share registry; — maintaining the Company’s website, including posting all announcements, reports, notice of meetings and governance information; — engaging in scheduled interactions with institutional investors and analysts; a separate Audit and Risk Committee. The Company and as such does not comply with ASX recommendation has adopted a Risk Management Policy (as disclosed on 7.3 (a). The Board has determined that given the size of the Company’s website) which describes the role and the Company, an internal audit function is not practical. responsibilities of the Risk Committee. The Committee The Board has adopted a Risk Management Policy and assumes the responsibilities of ensuring that risks and processes appropriate to the size of the Company to opportunities are identified on a timely basis and the manage the Company’s material business risks through Company’s objectives and activities are aligned with those the Audit and Risk Committee and senior management to risks and opportunities. The Committee and Board’s collective experience enables accurate identification of the principal risks which may affect the Company’s business. Management of these risks will be discussed by the Committee and the Board at periodic (at least annually) strategic planning meetings. In addition, key ensure regular reporting to the Board on whether those risks are being managed effectively in accordance with the controls in place such as: — monthly reporting to the Board in respect of operations and the financial position of the Company; operational risks and their management, are recurring items — monthly rolling cashflow forecasts budgets for deliberation at Board meetings. accompanied by variance analysis; The Committee comprises three Non-Executive Directors: Stephen Lowe, Terry Stinson and Grant Mooney, and their qualifications and experience together with meetings attended during the year are contained in the Directors’ Report section of the 2023 Annual Report. The Company has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the Committee. These are — circulating minutes of and relevant Committees to the Board and the Chair of each respective committee and provide a report to the Board on an annual basis; — employing appropriately qualified employees; — SWOT analysis; — developing commercial partnerships and relationships with end users; discussed further under the internal audit section below. — aligning Company activities with world class and The Board has received assurance from the Chief Financial innovative industry bodies and service providers; Officer and Managing Director that the declarations made — appropriate health, safety and environment in accordance with section 295A of the Corporation Act practices; and 2001 are: 1. founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and 2. the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects. — a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices. Economic, environmental and social risks The Company’s economic, environmental and social sustainability risks are discussed in the Directors’ Report section of the 2023 Annual Report. Talga GroupAnnual Report 2023 128 129 Principle 8: Remunerate fairly and responsibly It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Securities Trading Policy Board by remunerating Directors and employees fairly The Company recognises that Directors, officers and and appropriately. Remuneration Committee The Board has a separate Remuneration Committee in compliance with ASX Corporate Governance Principles and Recommendation 8.1. The Remuneration Committee is focused on providing independent reviews and recommendations to the main Board on remuneration employees may hold securities in the Company and that most investors are encouraged by these holdings. The Company’s Securities Trading Policy (as disclosed on the Company’s website) explains and reinforces the Corporations Act 2001 requirements relating to insider trading. The policy applies to all Directors, employees of the Company and their associates and closely related parties (collectively “Restricted Persons”). The policy is compliant with the ASX Listing Rules and expressly prohibits packages and policies applicable to Senior Executives and Restricted Persons buying or selling TLG securities where Directors themselves. The Remuneration Committee charter the Restricted Person is in possession of price sensitive is disclosed on the Company’s website. Members and or ‘inside’ information and in any event without the prior meetings of the Remuneration Committee are set out in the written approval of a clearance officer. Under the policy, Restricted Persons are also prohibited from entering into transactions or arrangements which limit the economic risk of participating in unvested entitlements under any equity based remuneration scheme. Directors’ Report section of the 2023 Annual Report. The remuneration details of Non-Executive Directors and Executive Directors are also set out in the Remuneration Report that forms part of the Directors’ Report section of the 2023 Annual Report. Remuneration policy As disclosed in the Remuneration Charter, Non-Executive Directors are remunerated at market rates for time, commitment and responsibilities. Remuneration for Non-Executive Directors is not linked to individual performance. There are no termination or retirement benefits for Non-Executive Directors. Pay and rewards for Executive Directors and Senior Executives consists of base pay and benefits (such as superannuation) as well as short-term and long-term incentives. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness. Details of Director and Senior Executive remuneration, including the Company’s policy on remuneration, are contained in the Remuneration Report which forms a part of the Directors’ Report section of the 2023 Annual Report. Schedule of mineral tenements Tenement* Project Interest held by Talga Suorravaara nr 3 Aero Project Sourravaara nr 5 Aero Project Jalkunen nr 1 Jalkunen Project Jalkunen nr 4 Jalkunen Project Kiskama nr 1 Kiskama Project Masugnsbyn nr 102 Masugnsbyn Project Raitajärvi nr 5 Raitajärvi Project Raitajärvi nr 7 Raitajärvi Project Nunasvaara nr 2 Vittangi Project Nunasvaara nr 3 Vittangi Project Vathanvaara nr 102 Vittangi Project Vittangi nr 2 Vittangi Project Vittangi nr 6 Vittangi Project Lautakoski nr 5 Pajala Project *Tenement holdings are all in Sweden 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Talga GroupAnnual Report 2023 Suite 3.03, Level 3 46 Colin Street West Perth WA 6005, Australia Phone: 08 9481 6667 ASX:TLG